Private ruling: GST - grants
Date of advice: 11 May 2026
Published: 20 July 2026
Ruling period: XX XX 20YY to XX XX 20YY
Date scheme commenced: XX XX 20YY

Ruling: Q1: Is the payment of the Grant by X to Y under the Grant Agreement, consideration for supplies in accordance with sections 9-10 and 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes

Relevant facts and circumstances: X entered into a Grant Agreement with Y. X is registered for GST. X provides the Grant to Y to carry out the activity on the terms of the Grant Agreement. The Grant Agreement sets out the agreement details and the terms and conditions, which together, details the arrangement between X and Y. The Grant Agreement in its entirety forms part of this private ruling. The Grant Agreement sets out the key activity milestones, detailing the stages of completion along with their respective deadlines. Failing to meet these milestones could result in termination of the agreement. The Grant Agreement sets out the grant payment schedule, detailing instalments $ (excluding GST), each tied to the completion of specific milestones and reports. Y have been awarded $ (excluding GST) under the Grant Agreement. Payments under this agreement (the Grant) depend on the completion of specific deliverables outlined in the Grant Agreement. The Grant Agreement states that Y must use the Grant payment only for the purposes of the activity and in accordance with the Grant Agreement. There is a requirement for Y to refund any unspent funds to X.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 section 9-15

Reasons for decision: Summary: The term 'supply' is defined in section 9-10 of the GST Act as meaning any form of supply whatsoever and includes: (a) a supply of goods; (b) a supply of services; (c) a provision of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation to: do anything; or refrain from an act; or tolerate an act or situation. However, the definition of supply excludes a supply of money unless the money is provided as consideration for a supply that is a supply of money. The term 'consideration' is defined in section 9-15 of the GST Act and extends beyond payments to include such things as acts and forbearances. Under section 9-15 of the GST Act, "consideration" includes: (a) any payment, or any act or forbearance, in connection with a supply of anything; and (b) any payment or any act or forbearance, in response to or for the inducement of a supply of anything. | Detailed Reasoning - Financial assistance payments: Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments (GSTR 2012/2) provide the Commissioner's views on when a financial assistance payment is consideration for a supply. The term 'financial assistance payment' is intended to encompass a wide range of payments. This includes payments: • made to provide support or aid to the payee, and/or • provided to support or aid in the implementation of government policy and initiatives. In your circumstances, the payment of the Grant by you to Y is considered financial assistance payments. The payment of the Grant provides support to Y by way of the provision of funding for Y to undertake certain projects which aids you in the implementation of government policy and initiatives. | Detailed Reasoning - Sufficient nexus between supply and payment: For a financial assistance payment to be consideration for a supply, it is not sufficient for there to be a supply and a payment. The financial assistance payment must be consideration for that supply. Paragraph 15 of GSTR 2012/2 explains that there must be a sufficient nexus between: • the financial assistance payment made by the payer, and • a supply made by the payee. A financial assistance payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The test is an objective one. Paragraph 16 of GSTR 2012/2 discusses factors that are to be taken into account when examining an arrangement and states: 16. Reference to all of the surrounding circumstances of the arrangement, in particular any written documentation, determines whether a financial assistance payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The surrounding circumstances may include the statutory purpose of the payer in providing the financial assistance, the activities which are to be undertaken by the payee and any other terms and conditions attached to the payment. However, none of these factors will be determinative on their own and the arrangement must the considered as a whole. The description the parties may give to the arrangement, whilst relevant, is not determinative Paragraph 28 of GSTR 2012/2 discusses 'payments for the entry into an obligation to do or refrain from doing something' and states: 28. Where a supply is constituted by the payee entering into an obligation with the payer to do or refrain from doing something and the payment is made to secure that obligation, there is a sufficient nexus between the payment and the obligation. This is because the financial assistance payment is made in connection with, in response to, or for the inducement of the entry into the obligation. The following example of sufficient nexus in relation to payment for entry into an obligation is provided at paragraphs 29 to 31 of GSTR 2012/2: 29. Snake Glass Jugglers is a commercial dance troupe that develops and presents performance art in state A. It enters into an arrangement with Gooseville Arts Foundation, a body that is established for the purpose of fostering the arts. Under that arrangement, in return for a financial assistance payment from the Foundation, the troupe enters into a binding agreement under which it is obligated to expand its activities - by presenting three performances outside state A during the following year. 30. By entering into this obligation to present three performances outside state A, the troupe has made a supply to the Foundation. The payment by the Foundation has been made in connection with, in response to, or for the inducement of this supply. Therefore, there is a sufficient nexus between the entry into the obligation and the financial assistance payment such that the financial assistance payment is consideration for that supply. 31. Snake Glass Jugglers is liable for GST on the supply of the entry into the obligation. The Gooseville Arts Foundation is entitled to an input tax credit on their acquisition of the right to require Snake Glass jugglers to present the performances. In regard to an 'obligation to do or refrain from doing something' X has submitted that the Grant Agreement does not impose penalties for failure to deliver a supply, apart from the recovery of funds as outlined in the Grant Agreement. Further, X submits that overall, the Grant Agreement has not considered an enforceable demand against the insufficient delivery of the Grant Agreement as part of the provision of the funds. As such, X submits that there remains an insufficient nexus between the funds provided and any supply made. We disagree with X's submissions. In this case, the obligations that the arrangement imposed on X and Y are contained in the Grant Agreement. Relevantly, Y agreed to undertake the activity in accordance with the milestones by the relevant completion date in the Grant Agreement. There are six milestones that Y needs to deliver by specified dates. The Grant Agreement breaks down the amount and timing of the payment of the Grant into six instalments which are aligned to when the six milestones are delivered. That is, in accordance with the Grant Agreement, the payment of a particular instalment of the Grant is only to be made on the completion of the associated milestone by the specified completion date. The Grant Agreement provides that X can withhold the Grant payment where Y fails to meet its obligations to meet the milestones, and that X can withhold the Grant payment until Y has shown to X that it has met all the milestones due on or before the payment date for the Grant instalment as set out in the Grant Agreement. Further, the Grant Agreement allows X to suspend the payment of the Grant all together, if Y fails to carry out the activity or otherwise failed to comply with an obligation under the Grant Agreement. There is also a requirement under the Grant Agreement for Y to refund any misapplied funds and unspent funds back to X. Therefore, there is sufficient nexus between the payment of the Grant by X and the obligations entered into by Y to make deliverables as set out in the milestones under the Grant Agreement. As such, the Grant payments are consideration for supplies that Y makes to X. Consequently, the payment of the Grant by X to Y, constitute consideration for supplies to X by Y under the Grant Agreement and in accordance with sections 9-10 and 9-15 of the GST Act.