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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1051551977233

Date of advice: 24 July 2019

Ruling

Subject: GST and financial grants

Question

Is the funding payment made by you to the Grantee in relation to the research conducted by them, consideration for a taxable supply?

Answer

No. The funding payment made by you to the Grantee in relation to the research conducted by them, is not consideration for a taxable supply.

Relevant facts and circumstances

You are a Not-for-profit entity that is registered for GST.

You are a Deductable Gift Recipient (DGR) and an endorsed charity for GST purposes.

You have sent a draft contract, which is yet to be signed by both you and the Grantee to finalise the grant agreement.

You have advised the Grantee is an endorsed charity for GST purposes.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-5.

Reasons for decision

In this ruling:

·         unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act),

·         all terms marked by an *asterisk are defined terms in the GST Act, and

·         all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

Supply

The basic rules require an entity, the supplier, to make the supply and generally another entity, the recipient, to acquire the supply and can claim input tax credits.

Section 9-5 provides you make a taxable supply if:

·         you make the supply for consideration

·         the supply is made in course or furtherance of an enterprise that you carry on

·         the supply is connected with the indirect tax zone, and

·         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 first requirement for a taxable supply is that you make a supply for consideration.

The term 'Consideration' is broadly defined.

In this case you do provide consideration to the Grantee. However, for it to be consideration for a supply, the payment needs to be made in return for the Grantee making a supply to you.

There is no legal obligation on behalf of the Grantee to ensure the project is undertaken and if the project ceases at any time the unused portion of the grant is to be returned to you. The grant of monies is provided for the Grantee to use to carry out a certain project, however they are under no contractual obligation to actually carry out the project. They only have certain reporting obligations and obligations to return the unused monies.

As such, you are not providing consideration for any supply being made to you. Therefore, the supply is not a taxable supply under section 9-5.

Note: This is conditional on you proceeding with the draft agreement you provided. If the agreement changes, this ruling may not be valid.

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