GST and fees charged relating to burial rights

This article is derived from a recent member Q&A and refers to the recently issued GSTD 2024/2: is the supply of a burial right in respect of a public cemetery subject to GST? The question was therefore timely. However, it is also timely for operators of public cemeteries to now review the GST treatment of fees charged.

As there have not been many GST public rulings or determinations issued by the ATO in the past few years, in this article we have provided some additional comments and explanations that were not included in our original response to the Q&A, providing some context and further information.

(Editor’s note: Where we refer to rulings/determinations issued by the ATO in our articles or Q&A responses, we also strongly recommend reading the entire ruling/determination as issued by the ATO, as there are often explanations and useful examples.)

Question

According to the new GSTD 2024/2, the supply of any permission, that must be obtained under state or territory legislation, to exercise a burial right by physically burying human remains or creating a memorial at the location covered by the burial right, is not subject to GST. Based on this, it appears that burial rights and monumental permit fees charged by Council would not be subject to GST.

Would GST be applicable to an Ashes Scattering Application Fee? That is, a fee charged for scattering of cremated human remains in a shared garden in a Council cemetery and for a plaque to be affixed to a scatter post (a wooden post in the ground used as a memorial)?

Answer

By way of background, paragraphs 4 to 6 of GSTD 2024/2 provide some general context from a GST perspective, namely:

• Taxable supplies are subject to GST, and one of the conditions is that there is a ‘supply for consideration’;
• Division 81 of the GST law effectively excludes from GST most legislatively imposed fees and charges for a permission, authority or licence, or for a supply of a regulatory nature made by an Australian government agency – by treating the amount charged as not being ‘consideration’;
• Most Australian fees or charges imposed under an Australian law and payable to an Australian government agency would therefore be ‘outside the scope’ of GST (not subject to GST), under Division 81; and
• However, some fees and charges are prescribed as being consideration and, if so, will fall back into the GST net (and be subject to GST).

We note an ‘Australian government agency’ is defined (in the income tax and GST law) to mean ‘the Commonwealth, a state, a territory, or a Commonwealth, state or territory authority‘.

Paragraph 7 of GSTD 2024/2 makes the following comments in relation to the definition of Australian governemtn agency (and we have included the footnote references for convenience):

‘encompasses entities including trusts formed by state or territory governments under state or territory legislation, local municipal councils and shire councils. Cemeteries operated by these kinds of entities or councils are referred to as public cemeteries in this Determination.‘

Footnotes:

[10] A charitable trust created by statute for the purpose of operating a cemetery under the supervision of a state or territory government on government-owned land may, depending on all the relevant facts and circumstances, be capable of satisfying the definition of an Australian government agency. Entities in this situation should consider the principles explaining when an entity will be regarded as being part of the Commonwealth, a state or a territory in Goods and Services Tax Ruling GSTR 2006/5 Goods and services tax: meaning of ‘Commonwealth, a State or a Territory’ to determine if they satisfy the definition of an Australian government agency.

[11] See GSTR 2006/5 in relation to the inclusion of local municipal and shire councils and other entities formed by state or territory governments to perform generally accepted governmental functions in the Australian government agency definition.

(For completeness we also note that in paragraph 3 of GSTD 2024/2 it states that the Determination does not apply to the supply of a burial right by an entity that is not an Australian government agency.)

In terms of other definitions, paragraphs 8 and 9 in GSTD 2024/2 refers to the terms ‘burial right’ and ‘order for interment’ or an ‘interment authorisation’.

For reference paragraph 8 is as follows:

‘8. State and territory legislation that regulates burials and cemetery operations empowers public cemeteries to grant to a person the right to bury or inter human remains (including cremated human remains) in a public cemetery in exchange for the payment of a fee or charge. This right is referred to as a burial right in this Determination. Depending on the state or territory legislation involved, a burial right may also include the right to place a memorial on the land that is the subject of the right.’

Paragraph 10 of GSTD 2024/2 provides that supplies made by an Australian government agency of any permission that must be obtained under state or territory legislation to exercise a burial right by physically burying human remains or creating a memorial at the location covered by the burial right, is not subject to GST.

The above highlights that regard may need to be had to the particular State or Territory legislation dealing with burial rights.

However, GSTD 2024/2 clarifies that whether the fee is being charged for the burial right, or the actual exercise of that right, the fee would be regulatory in nature and when charged by an Australian government agency falls within the ambit of Division 81 – such fees would not be subject to GST.

Given the above background context, provided the fee is payable to the Australian government agency for the permission:

• the ‘Ashes scattering application fee’ to scatter ashes in the designated area according to council guidance, appears to be a permission that would be be within Division 81 and treated as not being consideration (meaning no GST is payable); and

• if there is a separate fee for the right to place a scatter post and memorial plaque, this would also appear to be within Division 81 and treated as not being consideration (again meaning no GST is payable).

However, fees or charges for services, such as acquiring a scatter post, a memorial plaque, or gravedigging services are treated as consideration for a supply, and would generally be subject to GST. See paragraph 12 of GSTD 2024/2, which states:

’12. The fees or charges payable to a public cemetery operator, funeral director, or to another entity for the supply of other goods and services made in relation to a burial or cremation, including memorial plaques and gravedigging services are consideration for a supply. The supply of these goods or services are a taxable supply where the other requirements in section 9-5 of the GST Act are met.’

Example 1 confirms that where an Australian government agency which operates and manages a public cemetery for a local Council, a burial right fee (for 25 years) and the renewal fee (for a further 99 years) is within Division 81 and not subject to GST (it is outside the scope of GST meaning no GST is payable). However, fees for the supply and installation of the memorial and the supply of the gravedigging service are consideration and subject to GST.

Example 2 provides a more detailed example where a funeral director is involved and sets out the GST treatment of the various fees being charged.

Comments

GSTD 2024/2 provides the following explanation of the reasoning behind the GST treatment of certain fees charged by public cemeteries for the exercising of the burial right:

58. A condition that applies to exercising a burial right in a public cemetery can include complying with a requirement under the state or territory legislation, to obtain a permission from an Australian government agency to conduct a burial or create a memorial at the location covered by the burial right (for example, an order for interment, interment authorisation, or other similar permission required by legislation, however described).

59. The legislatively imposed fee or charge payable to an Australian government agency for obtaining the permission to exercise a burial right in a public cemetery, by performing the physical act of burying or interring human remains or creating a memorial at the site covered by the burial right, is not subject to GST.[32]

60. This is because, under subsections 81-10(1) and 81-10(4) of the GST Act, the payment of this fee or charge to an Australian government agency relates to the provision under state or territory legislation, of a permission, authority or licence (however described), and is therefore not consideration for GST purposes.[33]

61. The supply of a permission from an Australian government agency to exercise a burial right in a public cemetery, is a supply of a regulatory nature because it is integral to furthering the legislative control over the conduct of human burials and interments (as explained in paragraph 52 of this Determination).

Practically, the possible sequence of fees that may apply in relation to a burial right could be:

1. Fee paid for a burial right in a public cemetery – No GST – permission/regulatory (like the burial right fee in example 1)

2. Burial right renewal fee – No GST – permission/regulatory (like the renewal fee in Example 1).

3. Fee paid for the permission to exercise the burial right – No GST – permission/regulatory (someone has died, and you want to have them buried at the cemetery, you can’t do so unless you obtain permission – the fee for the permission to do so).

4. Other services, essentially fees charged for services such as gravedigging, and interment (sinking of the grave, the placement of the coffin or ashes therein, backfilling of the grave and removal of debris, etc) – GST – taxable.

A similar analysis should apply in relation to cremation and ashes. A fee charged for the permission to scatter ashes at a public cemetery would be the same GST treatment as bullet 3 above – No GST. However, if the public cemetery also charges a fee for the service of scattering the ashes, this would likely be treated the same as bullet 4 – GST applies. Similarly, if you pay a funeral director to scatter the ashes or similar service provider, then we would expect GST would apply as this is a service and not regulatory in nature.

We note the question also referred to ‘a plaque affixed to a scatter post (a wooden post in the ground used as a memorial)’. It is unclear in the question whether the fee is being charges for the permission to have a plaque affixed to a scatter post, or it is for the acquisition of the plaque and scatter post. If the fee is for a permission it would not be subject to GST. However, a fee to acquire a plaque and/or a scatter post would be taxable/subject to GST.

Given the above, it is important to understand what the fee is for. Provided the fee is payable to an Australian government agency for a permission (that is considered a regulatory act done by the entity/agency), then no GST would apply.

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