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  • Part 5 - Grants

    Non-interpretative – straight application of the law

    Issue 1: How will grants be treated under GST?


    On 30 May 2012 the ATO issued a ruling on financial assistance payments – GSTR 2012/2 - Goods and Services Tax: financial assistance payments.

    For a financial assistance payment (formerly known as a grant of financial assistance) to be consideration for a supply there must be a sufficient nexus between the financial assistance payment made by the payer and a supply made by the payee. This will depend on the particular facts and circumstances of each grant program.

    The term grant is not defined and the general principles of the GST Act apply in determining whether GST is payable on a grant transaction.

    GST is payable in respect of taxable supplies. Supplies made in connection with the receipt of a grant will be subject to GST where the grant represents consideration for a supply which is a taxable supply.

    Conditional grants made to a GST-registered grantee will usually be subject to GST.

    A grant will be subject to GST if the following four tests are satisfied:

    • Is the grant consideration for a supply by the recipient to the grantor?
    • Is the supply to which the grant relates made as part of the recipient's enterprise?
    • Is the supply for which the grant is paid connected to Australia?
    • Is the recipient of the grant registered, or required to be registered, for GST?

    Grant as consideration for a supply

    For the current ATO view about whether the financial assistance payment is consideration see paragraphs 100 to 114 of GSTR 2012/2.

    This part of the answer previously stated:

    The first test can be answered by considering whether a grant is conditional or unconditional. If the recipient undertakes or is required to do something in exchange for the funds this is a supply by the recipient for which the grant is consideration. The grant would therefore represent consideration for that supply.

    While a gift to a non-profit body is not consideration and so not subject to GST, most grants are not gifts. As mentioned above, a gift is something that is given by a donor out of generosity or benefaction, made voluntarily, and with no material benefit provided to the donor as a result of the gift. Funding grants do not generally have this character.


    The second test asks whether the supply by the recipient is made in the course of the recipient's enterprise. Activities performed in the nature of a business, and all activities of a religious institution or a charitable institution or fund, satisfy this test. We would consider that the supply made by the Australian organisation under a conditional grant would be made in the course of its enterprise.

    Connected with Australia

    The third test requires that the supply is connected with Australia. The supply of anything other than goods or real property is connected with Australia if the thing is done in Australia or is made through an enterprise carried on in Australia. See GSTR 2019/1 Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia).

    Is the grantee registered?

    The last test requires the supplier to be registered, or required to be registered, for GST. It is assumed that the Australian organisation will be registered for GST.

    Therefore, qualifying financial assistance payments made to a registered Australian organisation will be subject to GST provided the payments are connected with Australia.

      Last modified: 21 Dec 2020QC 27139