This Ruling, released on Wed 30.5.2012, explains the Commissioner’s views on when a “financial assistance payment” (which includes: (i) payments made to provide support or aid to the payee; and/or (ii) payments provided to support or aid in the implementation of government policy and initiatives) is consideration for a supply.
Where it is established that there is a taxable supply, the Ruling explains the GST obligations of the payee and the payer’s entitlement to any input tax credit in relation to the arrangement.
Payers of financial assistance payments are typically, but are not limited to, governments, government agencies, non-profit bodies and charities. The types of arrangements considered in the Ruling include, but are not limited to:
- an arrangement for the provision of advice or information;
- a right or the entry into an obligation to do, or not to do, something;
- payments made to assist the payee to acquire goods or services;
- sponsorships; and gifts.
Points made in the Ruling include:
- 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. The ATO says 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.
- Where the payer obtains a material benefit in return for the financial assistance payment, the payment has a sufficient nexus with the supply of the right because the payment is made in connection with, in response to or for the inducement of the supply of the right.
- A financial assistance payment has a sufficient nexus with the provision of advice or information where the payment is made for the purpose of obtaining the information.
The Ruling replaces GST Ruling GSTR 2000/11 (Grants of financial assistance) which is generally withdrawn with effect from Wed 30.5.2012 (but see below). It was previously issued in draft as Draft GSTR 2011/D4.
DATE OF EFFECT: When the final Ruling is issued, it is proposed to apply both before and after its date of issue subject to a proposed transitional arrangement which states that entities can continue to rely on the views expressed in the withdrawn GSTR 2000/11 for payments made before 1 January 2013 in certain circumstances.
[LTN 103, 30/5]