Edited version of your written advice

Authorisation Number: 1013104647831

Date of advice: 7 October 2016

Ruling

Subject: GST and appropriations

Question

Are grant payments you provide to various government entities under a funding deed, subject to GST?

Answer

No, the grant payments you provide under the funding deed are not subject to GST because the payments are not the provision of consideration under subsection 9-17(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

You are a government related entity. You are registered for GST.

You provide grants to other government related entities under the deed.

You provided a list of the government related entities that receive grant funding from you.

You advised that you receive funding allocation from appropriations budget for the payments of the grants.

You calculate the amount of the funding given to the successful applicant by cost benefit analysis and it is calculated on the basis that the sum of the payment relating to the supply of the services under the deed and anything received from you in connection with the supply does not exceed the anticipated or actual costs of making the supply.

You have confirmed that all of the lead organisations that are recipients of the grants are government related entities.

Reasons for decision

Unless otherwise stated, all legislative references in this Ruling are to the A New Tax System (Goods and Services Tax) Act 1999.

Section 9-40 of the GST Act provides that an entity must pay GST on any taxable supply that it makes.

This means that where it is established that the recipient of the grant funding is making a taxable supply to you, then the recipient is liable to pay GST on the grant received.

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

• the entity makes the supply for consideration

• the supply is made in the course or furtherance of an enterprise that the entity carries on

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

• the entity is 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.

Subsection 9-17(3) of the GST Act also provides that certain payments are not consideration and therefore the definition of a taxable supply under section 9-5 will not be met. Where this is the case, then the payments will not be subject to GST.

On the facts provided, your payments of grants to other government related entities satisfy the requirements of subsection 9-17(3) of the GST Act. That is:

a) you are a government related entity and you make a payment of the grant to another government related entity in connection with their supplies under the deed

b) the payment of the grant for services provided under the deed is covered by an appropriation under an Australian law, and

c) the payment of the grant for the services provided under the deed is calculated on the basis that the sum of the payment relating to the supply of the services under the deed and anything received from you in connection with the supply does not exceed the anticipated or actual costs of making the supply.

That being the case, the grants you pay to the government related entities under the deed, are not the provision of consideration.

Consequently, the services provided by the government related entities under the deed will not be taxable supplies under section 9-5 of the GST Act. Therefore, the grants paid under the deed will not be subject to GST.