Edited version of your private ruling

Authorisation Number: 1012477680201

Ruling

Subject: GST and refund of imputation (franking) credits

Question:

Is the refund of imputation (franking) credits paid by the Australian Taxation Office (ATO) to an entity (you) subject to goods and services tax (GST)?

Answer:

No. The refund of imputation (franking) credits made by the ATO to you is not subject to GST.

Relevant facts:

An entity (you) received a refund of $$$$ for imputation (franking) credits. This refund was paid by the Australian Taxation Office (ATO) to you.

The refund for the imputation (franking) credits of $$$$ was as a result of grants (distributions) received from an Australian organisation. The organisation informed you that it is not income tax exempt and as a result must pay income tax. However, the tax paid on funds distributed by the organisation to charity can be claimed back from the ATO by the organisation which receives the grant provided it has income tax exempt status.

The organisation issued you with notices regarding your imputation credits of $$$ for the 2011 tax return, and $$$ for the 2012 tax return.

You completed an ATO 'application for refund of franking credits' for the financial years ending 30 June 2011 ($$$ franking credit) and 30 June 2012 ($$$ franking credit). The total refund of franking credits was deposited in your bank account on {date} by the ATO.

Relevant legislative provisions:

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

A New Tax System (Goods and Services Tax) Act 1999, Section 9-10

A New Tax System (Goods and Services Tax) Act 1999, Section 9-15

Reasons for decision

The facts indicate that you have received an amount of $$$$ from the ATO for the refund of imputation (franking) credits. We will consider whether the $$$$ is consideration for any taxable supply.

GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

· you make the supply for *consideration; and

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

· the supply is *connected with Australia; and

· you are *registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is *GST-free or *input taxed.

(* denotes a defined term in section 195-1 of the GST Act)

One of the requirements for a taxable supply under paragraph 9-5(a) of the GST Act, is that the entity (supplier) makes 'a supply for consideration'. In other words, the entity has made a supply in return for consideration (such as payments).

The meaning of 'supply' is given in section 9-10 of the GST Act, which states:

9-10 Meaning of supply

(1) A supply is any form of supply whatsoever.

(2) Without limiting subsection (1), supply includes any of these:

· a supply of goods;

· a supply of services;

· a provision of advice or information;

· a grant, assignment or surrender of real property;

· a creation, grant, transfer, assignment or surrender of any right;

· a financial supply;

· an entry into, or release from, an obligation:

(i) to do anything;

(ii) to refrain from an act;

(iii) to tolerate an act or situation;

any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

(4) However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money.

The imputation (franking) credit is essentially an income tax credit, and the refund is treated as an income tax refund. When the ATO refunds the imputation (franking) credits to you, this is not regarded as consideration for any supply made by you to the ATO for GST purposes. That is, you are not making any 'supply' (as defined in the GST Act) to the ATO in return for the refund of the imputation (franking) credits (that is, income tax refund).

Accordingly, as there is no 'supply' made by you to ATO in return for the refund of the imputation (franking) credits, the refund amount that you received is not consideration for a taxable supply under section 9-5 of the GST Act, and is not subject to GST.

Additional information

For further information in relation to GST and grants, you may wish to refer to the following documents at the ATO website at www.ato.go.au:

Goods and Services Tax Ruling GSTR 2012/2: financial assistance payments

Charities consultative committee resolved issues - issue 1, and specific questions and answers.

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.