Edited version of private advice

Authorisation Number: 1051602757929

Date of advice: 1 November 2019

Ruling

Subject: GST and apprenticeship incentive payments

Question

Is the apprenticeship commencement incentive payment the Entity received under the Australian Apprenticeships Incentives Program from the Department of Employment, Skills, Small and Family Business subject to GST?

Answer

No

The scheme commences on:

1 August 2019

Relevant facts and circumstances

·  You are registered for GST.

·  You are an employer and have received an apprenticeship commencement incentive payment (payment) under the Australian Apprenticeships Incentives Program from the Department of Employment, Skills, Small and Family Business (the Department).

·  The payment you received is relation to an apprentice that you employed.

·  The Australian Apprenticeships Incentives Program Guidelines from the Department provide detailed eligibility criteria that an employer must meet to be eligible for the payment.

·  One of the eligibility requirements is that the apprentice must be employed by the employer as an apprentice at the effect date and the effect date is six months from the date of commencement.

·  You have provided a copy of the Australian Apprenticeships - Claims SmartForm (the application form) that you lodged with the Department for the apprenticeship.

·  When completing the application form for the incentive, you provided the following information:

·  name, address and contact details

·  ABN (where applicable)

·  name and date of birth of the apprentice

·  commencement date of the apprenticeship

·  start and end date of the apprentice's employment period

·  employment details (qualification)

·  bank account details for direct credit purposes.

·  There is no other agreement or contract between you and the Department in respect to the payment you have received. In order to receive the payment you were only required to submit the claim form.

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40

Reasons for decision

According to Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), GST is payable by an entity on any taxable supply that it makes. A supply is a taxable supply if all the requirements of section 9-5 of the GST Act are satisfied. Under section 9-5 of the GST Act an entity makes a taxable supply if:

·  The entity makes the supply for consideration

·  The entity makes the supply in the course or furtherance of an enterprise that the entity carries on

·  The supply is connected with Australia 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.

The GST treatment of financial assistance depends primarily on whether such a payment represents consideration that has the relevant connection with a taxable supply. Therefore, to satisfy the first requirement of a taxable supply in paragraph 9-5(a) of the GST Act, there must be a supply for consideration and there must be a connection between the two.

Essentially, a supply is something that passes from one entity to another. The supply may be one of particular goods, services or something else that is reflected in an agreement by one party to do something for another.

Supply is defined under section 9-10 of the GST Act. The definition includes an entry into, or release from, an obligation to do anything; or to refrain from an act; or to tolerate an act or situation but excludes a supply of money unless the money is provided as consideration for a supply that is a supply of money.

Consideration is defined under section 9-15 of the GST Act. The definition extends beyond payments to include such things as acts and forbearances to act. A payment will be consideration for a supply if the payment is in connection with, in response to or for the inducement of the supply.

Supplies made in connection with the receipt of a payment will be subject to GST where the payment represents consideration for a supply which is a taxable supply.

The payment is a financial assistance payment made by a government department. The GST treatment of financial assistance payments is discussed in Goods and Services Tax Ruling GSTR 2012/2 Goods and Services Tax: financial assistance payments (the Ruling).

In paragraph 15 of the Ruling, it provides that the financial assistance payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply.

In addition, paragraph 16 of the Ruling points that,

Reference to all of the surrounding circumstances of the arrangement, in particular any written documentation, determines whether a financial assistance payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The surrounding circumstances may include the statutory purpose of the payer in providing the financial assistance, the activities which are to be undertaken by the payee and any other terms and conditions attached to the payment. However, none of these factors will be determinative on their own and the arrangement must the considered as a whole.

In the absence of any supply of goods or services by the employer, it is necessary to consider if there is a supply of anything else such as the entry into an obligation to do something in return for the incentive payments. For such an obligation to give rise to a supply for GST purposes, it must be binding on the parties involved.

In your case, the payments made under the Australian Apprenticeships Incentives Program are an incentive for an employer to take on, retain and train new apprentices. To receive the payment, an employer is only required to satisfy the eligibility criteria outlined in the Australian Apprenticeships Incentives Program Guidelines and complete the required fields in the claim form. In doing so, the employer (you) does not appear to demonstrate taking the requisite positive action to have made a taxable supply for GST purposes.

In addition, once the employer satisfies the eligibility criteria, including employing the apprentice on the effect date, the employer will be eligible for the payment, there is no other obligation entered into by the employer in relation to the payment.

Furthermore, the claim form is not a contract of performance and does not impose any binding obligation on you to actively do anything in exchange for those payments. Therefore, there is no supply by you of the entry into a binding obligation in exchange for the incentive payment under the Australian Apprenticeships Incentives Program.

In summary, as you do not make a supply of goods or services and you do not enter into any binding arrangements in exchange for the payment, the incentive payment you receive is not consideration for a supply. As the incentive payment you received is not consideration for a supply you make, the requirements of a taxable supply in section 9-5 of the GST Act are not satisfied, and there is no GST included in the incentive payment you received.