Authorising the charging of fees and levies
This is a single section from Chapter 17. Read the full chapter here.
How is the fee amount determined?
Legislation must set out the manner by which the fee should be determined.
The empowering provision should state the basis by which to prescribe the fee. Fees for a service or function should normally be determinable in advance by the payer before the service is provided or the function is performed, unless the Act contemplates otherwise. Often a fee or levy will be a fixed amount. However, if a fee is to be determined by a particular method or calculation (such as a fee calculated by reference to an hourly rate), this should be authorised in the empowering provision.
The fee amount recovered should bear a proper relation to the cost of providing the service or performing the function and should not exceed that cost. If the fee amount exceeds the cost, the fee will be at risk of being declared unlawful on the basis that it is an unauthorised tax.
Any authority given to charge a fee is, therefore, implicitly capped at the level of cost recovery. Specific authority in the Act would be required to charge a fee that would recover more than the cost of providing the service because of an intention to impose a penalty, to limit access to, or demand for, a service or to meet a social objective. It is good practice that the relevant Cabinet papers provide a clear justification for the level of the fee.
A fee that cross-subsidises other services or other groups of users should generally be avoided. However, in the rare cases in which it may be appropriate for a fee to cross-subsidise other services, or other users, the cross-subsidisation should be transparent and the empowering provision must be drafted widely enough to authorise the cross-subsidisation.