Private ruling: GST and financial assistance payments
Published: August 2013

Ruling: Q1: Where you applied for a grant prior to registering for goods and services tax (GST) and did not include GST on the application, do you need to include the cash grants funds received after you registered for GST as GST inclusive or GST-free? | A1: The payments received are outside the scope of the GST system and therefore not subject to GST. They should not be reported on your activity statements.

Relevant facts and circumstances: You are registered for GST. You applied to government bodies for grants prior to your GST registration and did not include GST on these grant applications. You were not required to be registered for GST at the time you applied for the grants. These grants were for the purpose of promoting a certain type of activity. You decided that prior to receiving the grant payments, it would be better for you to be registered for GST. You received the grant payments (or part of the grant payments) after becoming registered for GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-5 | Section 9-10.

Reasons for decision: Summary: A supply for GST purposes is defined in section 9-10 of the GST Act and includes an entry into, or release from, an obligation to do anything. In your case, prior to being registered for GST you entered into agreements with government bodies for grants (also know as financial assistance payments) that you were required to use to promote a certain activity. The Australian Taxation Office's view on financial assistance payments is provided by the public ruling GSTR 2012/2. As an illustration of your type of agreement we refer to example 3 of the ruling: 1. Snake Glass Jugglers is a commercial dance troupe that develops and presents performance art in South Australia. 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 South Australia during the following year. 2. By entering into this obligation to present three performances outside South Australia, the troupe has made a supply to the Foundation... Given this, you made a supply under section 9-10 of the GST Act by entering into an obligation to promote the certain activity. However, unlike a supply of goods or services where the supply is generally made when the goods are made available or when the services are performed, we consider that the supply of entering into an obligation is made at the time the entity enters into the corresponding agreement. That is, your supply to promote the certain activity was made at the time you entered into each agreement. Not a taxable supply Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. One of these requirements is that the entity must be (or is required to be) registered for GST at the time of the supply. In your case, you were not registered or required to be registered for GST when you entered into the agreements. As such you did not make taxable supplies at this time under section 9-5 of the GST act. Consequently, any payments you receive from these grants made prior to your GST registration (albeit that you receive the payments after you registered for GST) is not for a taxable supply and hence no GST liability exists. As a consequence, these funds should not be reported on your activity statements.