Edited version of private advice

Authorisation Number: 1052083127164

Date of advice: 8 February 2023

Ruling

Subject: GST and taxable supplies

Question

Is the payment received by Entity A from Entity B consideration for a taxable supply?

Answer

No, the payment received by Entity A from Entity B is not consideration for a taxable supply.

Relevantly, to satisfy the first requirement in section 9-5 of the GST Act, an entity must first make a 'supply' for which payment is 'consideration'.

Goods and Services Tax Ruling, GSTR 2006/9 Goods and services tax: Supplies (GSTR 2006/9) at paragraph 180 explains that for a payment to be consideration for a supply there must be a sufficient nexus between the payment made by the payer/recipient and a supply made by the supplier. A payment is 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.

In this case we accept that there is no sufficient nexus between the supply made by Entity X and the payment received from the Entity B.

Further, the payments received by Entity A from Entity B fall within subsection 9-17(2) of the GST Act which provides that the making of a gift to a non-profit body is not the provision of consideration.

Therefore, Entity A is not making a taxable supply to Entity B in exchange for the receipt of the payment of monies.

Question 2

Is the payment received by Entity A from Entity B a gift to a non-profit body?

Answer

Yes

Paragraphs 69 to 75 in Goods and Services Tax Ruling, GSTR 2012/2 Goods and services tax: financial assistance payments (GSTR 2012/2) provide discussion regarding gifts to a non-profit body.

In this case Entity B voluntarily donates some or all of their Medicare receipts received for services that they perform in the Program to Entity A. Entity B does not receive an inducement or material benefit for making the donation. Therefore, it is accepted that the payment received by Entity A is a gift. Further Entity A is registered with the Australian Charities and Not-for-Profit Commission and is endorsed as a deductible gift recipient (DGR) for income tax purposes it is a non-profit body.

Under subsection 9-17(2) of the GST Act, the making of a gift to a non-profit body is not the provision of consideration for a supply.

As the payment meets the requirement of subsection 9-17(2) of the GST Act it does not constitute the provision of consideration for a supply made by Entity A.

This ruling applies for the following period:

1 January 20XX till quarter ending 31 December 20XX

The scheme commenced on:

1 January 20XX

Relevant facts and circumstances

Entity A is a not-for-profit entity and endorsed gift deductible recipient that is registered for GST.

Entity A provides services under a Program to eligible individuals which are performed by Entity B.

Entity A receives a payment of monies from Entity B.

There are no formal contracts, agreements or legal obligations in place which govern this arrangement between Entity A and Entity B.

There are no incentives, gifts, marketing, referrals, recognition or any other rights or privileges afforded to Entity B who participate in the Program or make donations to Entity A.

Where donations are made to Entity A they are made wholly at the discretion of the Entity B to support the mission and objectives of Entity B and its Program.

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 9-5(a)

A New Tax System (Goods and Services Tax) Act 1999 section 9-17(2)