Private ruling: Supply for consideration
Date of advice: 1 November 2017
Published: March 2018

Ruling: Q1: Are you making taxable supplies? | A1: No. | Q2: Are you entitled to input tax credits for the supplies that are made to you? | A2: No

Relevant facts and circumstances: ● You oversee and manage an activity. ● You are making supplies to organisations that carry out the activity provided they enter into a memorandum of understanding (MOU). ● Under the MOU, the organisations do not provide you with monetary payment for the supplies. However, the organisations are required to provide you access to their premises and assistance in making the supplies.


Reasons for decision: Summary: All legislative references are to A New Tax System (Goods and Services Tax) Act 1999. GST is payable on any taxable supplies that you make. Section 9-5 provides you make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone; and (d) you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The supplies you are making to the organisations are not taxable supplies as the supplies are not made for consideration. The organisations are not subject to any obligation under the MOU to make a monetary payment. Although the MOU provided that the organisations are required to provide access and assistance in order for you to make the supplies, these obligations are not non-monetary consideration for the supplies. GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) sets out the test for determining whether something is non-monetary consideration for a supply. Consideration for a supply may include acts, rights or obligations provided in connection with, in response to, or for the inducement of a supply. However, things such as acts, rights and obligations can often be disregarded as payments as they do not have economic value and independent identity separate from the transaction. The Ruling states: 81. For a thing to be treated as a payment for a supply, it must have economic value and independent identity provided as compensation for the making of the supply. That is, it must be capable of being valued and be a thing that an acquirer would usually or commercially pay money to acquire. Whether this requirement is satisfied will usually be demonstrated by the parties to an arrangement assigning a specific or separate value to the thing. However, the assigning of a value by the parties is not necessary for a thing to have economic value. 82. Whether a payment is consideration for a supply depends on the true character of the transaction. Consideration for a supply is something the supplier receives for making the supply. Although a non-monetary payment (and acts or forbearances) can form consideration, the character of the transaction will determine whether it forms part of the consideration received by the supplier for making the supply. 83. Many transactions involve exchanging various rights and obligations between the parties to the transaction. In particular, the true character of the transaction may characterise the payment as a condition of the contract rather than the provision of non-monetary consideration. For example, in many cases, agreeing to enter into a contract to receive a supply for a specific period of time is not non-monetary consideration for that supply. 84. Also, subject to the terms of the agreement, transactions will often involve a supply made only for monetary consideration. In these circumstances, obligations entered into as part of the transaction by the entity that is liable to provide the money will not be separate parts of the consideration for the supply. Similarly, where the transaction in substance involves a supply made for a thing that is non-monetary consideration, the obligations to provide that thing will not constitute separate parts of the consideration. The obligations under the MOU facilitate the supplies to be made by you to the organisations. They do not have economic value or independent identity from the supplies and therefore cannot be characterised as “payment” or compensation for the supplies. Therefore, there is no consideration for the supplies and the elements for a taxable supply are not made out.