Receiving Grants

Outright grants, with no benefits given to the grantor, are not subject to GST.
Grants are however subject to GST when the recipient of the grant has done something for the grantor in order to receive the grant, i.e. a supply took place.

Determining if GST Applies

No Supply

Grant (No Supply)

When receiving grant, you do not provide any benefits in return to the grantor. Hence, there is no supply and GST is not applicable.

Supply Exists

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When receiving grant, you provide benefits in return to the grantor in the form of goods or services.  Hence, there is a supply and GST is applicable.

Accounting for GST on Benefits

You must account for output tax at the prevailing tax rate on the open market value (OMV) of the benefits.

If the OMV is not available, you should account for GST at tax fraction (e.g.7/107) on the grant amount.

Claiming Input Tax on Expenses

When you receive grants to enable you to provide free or subsidised goods and services, you are treated as carrying on both business and non-business activities.

You are not allowed to claim the GST (input tax) incurred on your taxable purchases in full because part of the purchases is for non-business activities. Only purchases for business activities are claimable.

For more information on grants and input tax apportionment, please refer to GST Guide for Charities and Non-Profit Organisations (349KB).

  • I am a child care centre operator. I received a grant from a government agency to renovate my child care centre. Do I have to account for output tax on the grant received? Can I claim input tax on the renovation expenses?

    You are required to account for output tax if you provide direct benefit to the government agency in return for the grant. If the renovation grant is an outright payment for which no benefit is conferred to the grantor in return for the grant, you are not required to account for output tax on the grant received.

    You can claim input tax on the renovation expenses if you are carrying on wholly business activities to make fully taxable supplies. If you are carrying on both business and non-business activities, a portion of the GST incurred by you is attributable to your non-business activities and hence is not claimable as your input tax credit.

  • I am a training provider. The trainee is awarded a grant to subsidise his course fee. However, the grant payment is made to me and I deduct the amount from the trainee's course fee. Do I charge GST on the gross course fee or the net course fee?

    In this case, the grant is for the trainee. The grant payment being made to you instead of directly to the trainee is merely a payment arrangement. You need to charge and account for GST on the gross fee.

    In other cases where the grant is awarded to you to subsidise your cost of training so that you are able to charge the course fee at a subsidised rate, GST is chargeable on the net fee.

  • I am a training provider. I receive grants from a government agency (e.g. WDA grants) to subsidise my cost of training so that I can charge the course fees at a reduced rate to the trainees. Can I claim in full the GST (input tax) incurred on my taxable purchases?

    You are able to provide training at reduced rates and GST is chargeable based on the reduced rates, because grants are provided to subsidise your cost of training.

    As you do not provide any benefits to the grantor in return for grants received, such grants are outside the scope of GST and regarded as non-business receipts.

    As you are carrying on both business and non-business activities, a portion of the GST incurred by you is attributable to your non-business activities. The portion for non-business activities is not claimable.

    For input tax apportionment, if you are unable to separately track and attribute the input tax between your business and non-business activities, you can use the following simplified apportionment method:

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    Where:

    1. Non-business receipts refers to the grants received by you to subsidise your cost of training.
    2. Total input tax incurred excludes any input tax specifically disallowed under Regulations 26 & 27 of the GST (General) Regulations (e.g. GST incurred on motor car-related expenses, medical expenses and insurance).

    If you can identify the input tax for wholly business activities (i.e. non-subsidised activities) to make fully taxable supplies, such input tax is fully claimable. You can then apply the formula above to the remaining input tax which is incurred for both your business and non-business activities to arrive at the remaining input tax claimable. The portion of the input tax incurred for carrying out non-business activities cannot be claimed.

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