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Edited version of private advice
Authorisation Number: 1051655237378
Date of advice: 2 April 2020
Ruling
Subject: GST and grants
Question
Is the grant received from the Government consideration for a taxable supply, made by you, under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, the grant received from the Government is not consideration for a taxable supply made by you under section 9-5 of the GST Act.
Relevant facts and circumstances
You are registered for goods and services tax (GST). You are a not-for-profit organisation founded in 20XX to raise community awareness and provide education about a disorder, encourage the formation support groups and promote understanding of the condition among health care professionals.
You received a grant from the Government (including GST). You received a recipient created tax invoice (RCTI) from the Government for that amount.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Reasons for decision
Under section 9-5 of the GST Act, you make a taxable supply if:
· you make the supply for consideration, and
· the supply is made in the course or furtherance of an enterprise that you carry on, and
· 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.
Supply
Subsection 9-10(1) of the GST Act defines a supply as being any form of supply whatsoever.
Subsection 9-10(2) of the GST Act provides that, without limiting subsection 9-10(1) of the GST Act, supply includes any of these:
· a supply of goods
· a supply of services
· a provision of advice or information
· a grant, assignment or surrender of real property
· a creation, grant, transfer, assignment or surrender of any right
· a financial supply
· an entry into, or release from, an obligation
- to do anything, or
- to refrain from an act, or
- to tolerate an act or situation,
· any combination of any 2 or more of the matters referred to above.
You have obligations to spend monies in particular ways and you supply information all of which can be considered a supply for the purposes of section 9-10 of the GST Act. However, the supply needs to be 'for' consideration. Therefore, there needs to be a sufficient nexus between the grant monies provided by the Government and a supply made by you for the payment to be consideration for that supply. These concepts are discussed in Goods and Services Tax Ruling GSTR 2012/2 which provides at paragraphs 15 and 15A:
15. For a financial assistance payment to be consideration for a supply9 there must be a sufficient nexus between the financial assistance payment made by the payer and a supply made by the payee. A 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.10 The test is an objective one.
15A. Further, in identifying the character of the connection, the word 'for' ensures that not every connection between supply and consideration meets the requirements for a taxable supply. That is, merely having any form of connection of any character between a supply and payment of consideration is insufficient to constitute a taxable supply10A.
There is not a sufficient nexus between any supplies that you make and the consideration provided by the Government. The payment is not made by the Government in order to obtain a supply of anything from you. There are merely expectations on what you have to report and do and if you don't do those things you may be required to repay the monies. As such, it is not considered you make a supply for consideration. Therefore you are not making a taxable supply under section 9-5 of the GST Act.