Private ruling: GST and receipt of a grant
Date of advice: 21 June 2016
Published: September 2016

Ruling: Q1: Is the payment received by Entity A (you) from Entity B to fund a project subject to GST? | A1: No, the payment you received from Entity B is not consideration for a taxable supply and, therefore, the payment is not subject to GST. All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 . Subsection 7-1(1) provides that GST is payable on taxable supplies. Under section 9-5 one of the requirements for making a taxable supply is that you make a supply for consideration. Under section 9-10 a supply is not just a supply of goods or services. Supplies can also be made in relation to rights, obligations and information for GST purposes. Under section 9-15 the term 'consideration' is broadly defined as including any payment, or any act or forbearance, 'in connection with', 'in response to' or 'for the inducement' of a supply. Therefore, to determine if you have made a taxable supply for which you received the payment, it is first necessary to consider whether you have made a supply for consideration. Goods and Services Tax Ruling GSTR 2012/2 - Goods and services tax: financial assistance payments (GSTR 2012/2) provides guidance 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 and includes payments made to provide support or aid to the payee. In your circumstances, the payment you received is considered to be a financial assistance payment. In the context of financial assistance payments, paragraph 15 of GSTR 2012/2 explains that for a payment to be consideration for a supply there must be a sufficient nexus between the payment made by the payer and a supply made by the payee. In establishing if there is a sufficient nexus between a payment and a supply, paragraphs 15A and 16 of GSTR 2012/2 explain that not every connection between supply and consideration meets the requirements for a taxable supply. Reference is to be made to all of the surrounding circumstances of the arrangement, in particular any written documentation. The circumstances may include 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 be considered as a whole. In your circumstances, the payment you received pursuant to the grant agreement between you and Entity B (Agreement) is to fund a project. However, the Agreement also provides that you are to do something in relation to the support you received. For example, in relation to reporting, the Agreement provides that you must provide a report to Entity B. We consider the reporting requirement to be part of the mechanism of making or accounting for the financial assistance payment. In accordance with the guidance at paragraphs 132 and 133 of GSTR 2012/2, these things are considered to form part of the circumstance in which a supply is made but are not of themselves supplies for which the payment is made. Further, in the table at paragraph 144 of GSTR 2012/2, an example of circumstances where a payment is made but a supply has insufficient nexus is provided at page 27 which states: The only supply the payee makes is … giving a report to the payer about how the monies were spent. There is nothing else supplied by you to Entity B for which the payment you received is in connection with, in response to or for the inducement of a supply. As you are not making a supply for consideration, there is no supply by you that is a taxable supply under section 9-5. Therefore, the payment you received from Entity B pursuant to the Agreement is not subject to GST.

Relevant facts and circumstances: You carry on an enterprise and you are registered for GST. You are also a registered charity with Deductible Gift Recipient status. You received a payment from Entity B pursuant to the Agreement. You made a funding application to Entity B which included certain information.

Relevant legislative provisions: All legislative references are to the GST Act: • subsection 7-1(1) | • section 9-5 | • section 9-10 | • section 9-15.