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Edited version of your written advice
Authorisation Number: 1051205465206
Date of advice: 27 March 2017
Ruling
Subject: Government assistance payments - Hardship payments
Question 1
Do the grants and hardship payments constitute payment for a supply made by the applicants to the Department?
Answer
No.
Question 2
Is the Department making an acquisition for GST purposes for which it is eligible to claim input tax credits?
Answer
No.
Question 3
Is there a requirement for the Department to hold a tax invoice from the recipient of the payment or raise a recipient created tax invoice?
Answer
Does not arise.
Relevant facts and circumstances
The Relevant Assistance Package (X) will assist applicants to innovate, improve and adapt their business and support those who are experiencing severe financial hardship as a result of reforms.
Recently, the Department (you) commenced making two types of payments as follows:
1. Grants - This consists of two types of fixed payments
These payments are intended to assist eligible applicants adjust to the new operating environment.
The first payment was processed in 20XX.
2. Hardship Payments (HP) - The hardship fund makes discretionary payments to individual applicants.
The HP is open to all applicants and is not confined to those operating in a particular area. The first payment was processed in 20XX
.
Both payments were made available following significant changes in government regulations and reforms.
The payments are funded from income received by the Department from the receipt of fees.
The Grants are made under an Act
Ownership is not affected if an applicant receives a payment.
Eligibility for hardship funding is reviewed on a case by case basis and funding amounts will be based on a person's financial circumstances.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 9-5.
Reasons for decision
Grants
An entity for GST purposes is liable to GST if the entity makes a taxable supply - GST is payable on taxable supplies.
An entity makes 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 the indirect tax zone; and
(d) you are *registered, or *required to be registered.
The GST Act, also requires that the supply must not be GST-free or input taxed.
Some arrangements do not involve anyone making any supply whatsoever. If no supply has been made, a key element of the definition of taxable supply is not met.
Under the Grants, you offer a lump sum amount to applicants.
Under the enabling legislation (the Act), the applicant must complete an application form and provide such documents as required to satisfy the authority that they are eligible to receive the payment. Once an application is submitted and all required supporting documents have been provided, the application will be assessed. Eligible approved applicants will receive the one-off payment. No further action is required from the applicant.
It is understood that, generally, applicants are not required to undertake any activity (other than making an application in accordance with the Act, or enter into any agreement to do something or refrain from doing something.
The Grant is paid once the applicant has met the eligibility criteria.
In meeting the criteria under the Act, applicants do not supply any goods, services, or anything else to you or any other entity. Therefore, there are no GST consequences arising from the arrangement for either of the parties in regard to payment of the Grant; the applicant has no liability to pay GST and you do not make a creditable acquisition giving rise to an input tax credit entitlement.
Further, if a supply was made by the applicant for the Grant, to be consideration for a supply there must be a sufficient nexus between the payment made by you and the supply made by the applicant. A payment would be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The test is an objective one.
HP
The reasoning that applies to the Grant will also apply to the HP. There is no supply made by the applicants for which the payment could be deemed consideration. Therefore there are no GST consequences for the HFP.