Edited version of private advice

Authorisation Number: 1052408778101

Date of advice: 18 June 2025

Ruling

Subject: GST - grants

Question 1

Are the grants awarded by a government statutory authority in accordance with standard terms and conditions consideration for supplies?

Answer 1

No.

This ruling applies for the following period:

1 July to 30 June 20XX

The scheme commenced on:

X Date

Relevant facts and circumstances

A government statutory authority is empowered to make grants for specified purposes for the benefit of the community. All such grants are awarded, paid, and administered in accordance with Standard Terms and Conditions which require the grantees to spend the grant monies on those specified purposes and to provide reports to the authority on how the monies are spent. No other supplies are made to the authority.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 - sections 9-5, 9-10, and 11-5

Reasons for decision

The question of whether a payment is consideration for a supply for GST purposes is essential to determining whether or not a taxable supply has been made (section 9-5 of the GST Act) or a creditable acquisition has been made (section 11-5 of the GST Act).

If the grants made by the authority are not consideration for a supply, there are no GST consequences for either the authority or the Grantees.

The Commissioner's views on the circumstances where a financial assistance payment, such as a grant, is consideration for a supply are set out in Goods and Services Tax Ruling GSTR 2012/2 - Goods and services tax: financial assistance payments (GSTR 2012/2).

According to GSTR 2012/2, 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 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. The test is an objective one.

Having regard to the authority's Grants Standard Terms and Conditions, we consider that a Grantee of a grant made by the authority may be viewed as making a supply by virtue of entering into obligations to do certain things in each case, i.e., apply the grant monies to specified purposes and report back to the authority accordingly. This is due to the wide definition of 'supply' for the purposes of the GST Act. Specifically:

a)             paragraph 2(c) of the definition of 'supply in section 9-10 of the GST Act treats as a supply any provision of advice or information; and

b)             paragraph (2)(g) treats as a supply, among other things, the entry into an obligation to do anything.

However, as the Commissioner states at paragraph 40 of GSTR 2012/2:

Things are often supplied by the payee to the payer that satisfy the statutory definition of a 'supply', given the broad meaning of 'supply'. In some circumstances, things may be supplied by the payee that are merely incidental or have insufficient nexus to the financial assistant payment.

As an example of a supply that is considered to have an insufficient nexus to a financial assistance payment, the Commissioner states at paragraphs 41 to 43 of GSTR 2012/2:

41. A business qualifies for a government financial assistance payment that is to promote the advancement of technology. For the purposes of the government agency's own internal assurances, the business is required to provide a report to the agency outlining how the funds were expended.

42. The payment is made to enable the business to improve its technological capability, not to obtain the report on how the financial assistance payment was expended. The financial assistance payment does not have a sufficient nexus with the supply of the report because the payment was not in connection with, in response to or for the inducement of the report.

43. Therefore, there are no GST consequences for either party.

In the same manner, it is our view that the authority's grants are made as funding for the Grantees' specific programs, not to obtain reports from the Grantees on how the grants were expended. As such, the grants do not have a sufficient nexus with the supply of the reports because the payment was not in connection with, in response to or for the inducement of the reports.

In addition, it is to be noted that, apart from the reports Grantees are required to give to the authority regarding the acquittal of grant funds, the funding agreement creates no obligations on the part of Grantees to supply anything else to the authority. Instead, the focus of the Grants Terms and Conditions is to ensure, as far as possible, that Grantees use the Funding to undertake the Activities for which the Grants are made. In that regard, the Grants Terms and Conditions reflect a disinterest on the part of the authority in outcomes beyond that focus. This is supported by the following:

•                The Grantee is fully responsible for the Activity, and will not be relieved of that responsibility because of:

o        the grant or withholding of any approval or the exercise or non-exercise of any right by the Commonwealth; or

o        any payment to, or withholding of any payment from, the Grantee under the Agreement (clause 7.3).

•                The Grantee agrees that they are not relieved of their obligation to carry out the Activity as required by the Agreement merely because a part of the Agreement is subcontracted (clause 9.4).

Accordingly, it is our view that the supplies made by Grantees in accordance with the authority's Grants Standard Terms and Conditions do not have a sufficient nexus with the grant monies to constitute either taxable supplies made by the Grantees to the authority or creditable acquisitions made by the authority.