Edited version of private advice

Authorisation Number: 1052211720202

Date of advice: 17 January 2024

Ruling

Subject: GST and financial assistance payments

Question

Is GST payable on the donations passed on by you to the domestic violence shelters that you partner with, in cases where there is no formal agreement outlining performance obligations?

Answer

No.

The scheme commences on:

The date of issue of this notice of private ruling.

Relevant facts and circumstances

You work with communities to establish and operate shelters which provide short term emergency accommodation and support in a safe environment that enables homeless women to rebuild self-esteem and achieve control and fulfilment of their lives.

Each shelter is its own, independent incorporated entity with a skilled volunteer board and paid staff.

Each shelter has DGR status.

You receive donations from individuals and philanthropic foundations for specific purposes across the shelter network, such as to support brokerage for the women, programs for the children that enter the emergency accommodation with their mother/carer and to support outreach by a shelter.

You advise the shelters of the availability of funds (as provided by the donors).

Once the application for the funding is approved by you, the shelter raises an invoice to you from which the funding is then transferred.

There is no formal agreement between you and the shelter outlining performance obligations.

There is no requirement for the shelter to refund the funding.

There is no material benefit received by you and you only pass in the donation received from the individual or philanthropic foundation.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision

A supply is a taxable supply where the positive requirements imposed by section 9-5 GST Act are satisfied. Amongst these is the requirement imposed by paragraph 9-5(a) of the GST Act that a supply be made for consideration.

Relevantly, Goods and Services Tax Ruling 2012/2 Goods and services tax: financial assistance payments (GSTR 2012/2) explains the Commissioner's views on when a financial assistance payment is consideration for a supply and provides the following guidance:

•         for a financial assistance payment to be consideration for a supply there must be a 'sufficient nexus' between the financial assistance payment made by the payer and a supply made by the payee;

•         a sufficient nexus exists where, upon an objective assessment and regard is had to the true nature of the transaction, the financial assistance payment is found to be made 'in connection with', 'in response to' or 'for the inducement of' a supply;

•         in identifying the character of the nexus required, the word 'for' ensures that not every connection between a supply and consideration meets the requirements for a taxable or input taxed supply (it is therefore not enough that there be any form of connection between a supply and the payment of consideration to constitute a taxable or input taxed supply);

•         reference to all of the surrounding circumstances of the arrangement supporting the payment of financial assistance (considered as a whole) determines whether there is a sufficient nexus. 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;

•         provided that there is a sufficient nexus, a voluntary payment can be consideration for a supply (i.e. the payer in such a case does not have to be the recipient of the supply).

In applying the above to your circumstances, there is no more than a mere expectation that the funds will used to carry out the stated purpose of the shelter. There is no binding obligation to do so, nor any requirement to repay the funds once transferred.

There are no other goods or services passing between the parties.

As such, there are no GST consequences arising from the arrangement for either party.