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Edited version of private advice
Authorisation Number: 1051523709283
Date of advice: 11 June 2019
Ruling
Subject: GST and support payments
Question
Are support payments you receive subject to GST?
Answer
No, the support payments are not subject to GST.
This ruling applies from the following period:
Relevant facts and circumstances
You are registered for GST
You commenced operations and achieved practical completion.
You entered into an agreement.
The majority of your revenue comes from two sources.
· The first source of revenue is sold. These payments are subject to GST as the supplies are taxable supplies.
· Revenue from the support payments.
You signed an Entitlement Agreement with the Entity, under which you are listed as the entitlement holder. The entitlement started and has a term of years. An Agent is acting as an agent and will make the support payments to you.
You issue invoices for the amount of support payments. You do not include (charge) GST on the invoice amount.
Under the agreement the support payments are referring to the difference on prices versus the fixed prices, times the supply.
The support payments will be high if prices were low and vice versa. The support payments will be zero if prices are higher than or equal to the agreed price.
Under a section is the Meaning of entitlement of the Act.
The Deed of Entitlement document provides the information.
A paragraph explains that the method of settlement is detailed which stipulates the payment methodology.
A paragraph outlines the Settlement requirements.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
Section 9-5
Reasons for decision
Under section 9-5 of the GST Act, a supply is a taxable supply if the supply is made for consideration, in the 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.
It is considered that in your situation all of the requirements of section 9-5 of the Act are met apart from the requirement of 'the supply made for consideration'. That is, the payment received will only be subject to GST if you have made a supply in return for the support payment.
The support payments are provided for under the Act. Entities that are Entitlement Holders are entitled to a support payment. As an entitlement holder you have a right to receive support payments under the Act.
The agent has a responsibility to pay support payments to you.
Each month you need to provide certain information in relation to your support payment entitlement for that month, you do not do anything further or supply anything for the actual payment of the support payments.
It is considered that you do not 'make a supply for consideration' and as a result you do not make a taxable supply for the purposes of the section 9-5 of the GST Act, when you invoice and receive support payments.
Therefore, support payments are not subject to GST as they are not consideration for any taxable supply made by you.