Edited version of your private ruling

Authorisation Number: 1012541708123

Ruling

Subject: GST miscellaneous rules and grants

Question

Are the Grant payments to eligible recipients subject to goods and services tax?

Answer

Yes, the payments to eligible recipients are subject to GST.

Relevant facts and circumstances

The Grant is an initiative to encourage eligible recipients (X) to work in places where there are workforce shortages (Y).

The Grant is for X to relocate to, or remain in, Y areas. It also provides training opportunities for X in area Ys.

X who join certain workplaces and work full-time for a specific minimum time are eligible for a grant. The grant is paid directly to X. Grants are available on a pro-rata basis for X who wish to work part-time.

X who want to set up a group workplace can apply for a grant, but must make concurrent, individual applications and specify that they are setting up jointly. The grant amount payable to each X will depend on whether he or she intends to work in the area Y full-time or part-time.

X can qualify for the grant if they:

· have worked in a certain area in the 12 months before applying

· have not worked in an area Y in the 12 months before applying

· are not subject to any professional restrictions; and

· are relocating from a workplace that is at least x kilometers from your workplace.

Administration

From the recent year the grants will be administered by selected agents.

Applicants will be informed by a delegate of the outcome of their applications for participation in the program. Successful applicants will be notified by an approval letter which will include a Deed of Agreement setting out the grant arrangements and conditions.

No changes may be made to grant arrangements without the agreement of both the grant recipient and you. Changes to the Deed of Agreement must be formalised through a Deed of Agreement Variation.

The delegate has discretion to give special consideration to grant recipients who are unable to remain compliant with the requirement of the Deed due to exceptional circumstances.

Individual Deeds of Agreement are negotiated with X and managed over the course of the retention period.

The program guidelines state that Goods and services tax (GST) applies to grant amounts made to recipients who are registered or required to be registered for GST. The recipients are required to submit to the entity a tax invoice in accordance with the A New Tax System (Goods and Services Tax) Act 1999 when claiming their grant payments.:

Recipients are required to submit a tax invoice to you for each payment of the grant as and when it falls due, as specified in the Deed of Agreement.

Recipients are required to have an Australian Business Number to be eligible to receive the full grant amount to which they are entitled.

Payment

Recipients are paid in three instalments.

§ Recipients X per cent when the agreement is signed with you

§ X per cent when the you have verified that the recipient has started working in your new approved location and

§ X per cent 12 months after the recipient became eligible for the second grant payment, subject to verification that they have met the conditions of their agreement during that year.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7-1

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-20

Reasons for decision

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that GST is payable on *taxable supplies

*(the asterisk denotes a defined term in the GST Act).

Section 9-5 of the GST Act also provides the requirements necessary for a supply to be taxable and states:

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 Australia; and

(d) 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.

Supplies

The first consideration is whether an entity makes a supply (paragraph 9-5(a) of the GST Act).

The meaning of a supply for GST purposes is provided by section 9-10 of the GST Act.

The Australian Taxation Office view on supplies is contained in Goods and Services Tax Ruling GSTR 2006/9. Paragraph 33 of GSTR 2006/9 confirms that the concept of a supply as provided by subsection 9-10(1) of the GST Act is intended to encompass supplies as widely as possible. Subsection 9-10(2) of the GST Act provides a list of things that are included as supplies. This list includes a supply of services and the entry into, or release from, an obligation to do anything.

A supply requires some act of provision, furnishment, conferral or giving of some thing (paragraph 76 of GSTR 2006/9).

For GST purposes the entity may still make a supply in the absence of enforceable obligations, provided there is something else, such as goods, services or some other thing, passing from the supplier to the recipient (paragraph 108 of GSTR 2006/9).

X by a Deed of Agreement agree to abide by the program guidelines, or where the applicant is a company or trust, the applicant agrees to ensure that the X abides by the program gidelines, and in return you agree to pay the applicant a relocation incentive Grant for a specified period. In entering into the Deed of Agreement an applicant is making a supply for the purposes of the GST Act.

Consideration for a supply

A supply is a taxable supply, if, among other things, the supply is made for consideration. Consideration is defined in section 195-1 of the GST Act which states:

consideration , for a supply or acquisition, means any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition.

Section 9-15 of the GST Act relevantly states:

(1) Consideration includes:

(a)  any payment, or any act or forbearance, in connection with a supply of anything; and

(b)  any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

(2) It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the *recipient of the supply.

Paragraph 9-15(1)(b) of the GST Act highlights the fact that a payment will be consideration for a supply if the payment is in connection with a supply and if it is in response to or for the inducement of a supply. Thus, there must be a sufficient nexus between a particular supply and a particular payment which is provided for that supply for there to be a supply for consideration.

Therefore, consideration comprises two elements. The first element is the payment by one entity to another; the second is the nexus that must be established between that payment and a supply.

It is therefore necessary, given the definitions of supply and consideration in the GST Act, to determine whether there are supplies made by the X to you and whether there is a sufficient nexus between these supplies and the payments.

The payment is only paid to the X who relocate and remain and meet the criteria set out in the program guidelines. There is a nexus between the payment and the agreement by the X.

Taxable supply

Accordingly, the entity is making a supply for which the above payments are consideration. Paragraphs (b), (c) and (d) of section 9-5 of the GST Act are also satisfied as the supplies are made in the course or furtherance of the enterprise, are connected with Australia as they are made in Australia and the entity is registered or required to be registered for GST.

There are no provisions in the GST Act or any other Act that would allow the supplies to be GST-free or input taxed. Consequently, your supplies are taxable as they satisfy all the requirements of section 9-5 of the GST Act.