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GST Q&A – Provision of funding for Christmas functions

Is GST payable on funding provided by Council’s related DGR to meet the cost of a Christmas function hosted by a not-for-profit entity?


Council has a related endorsed deductible gift recipient (DGR) fund. Through the DGR, Council provides funding to various not-for-profit entities (NFPs) to host Christmas luncheons for individuals experiencing financial hardship. The NFP must apply for this funding and must also meet various criteria including:

  • The funds must be spent only on approved expenditure items such as food, non-alcoholic beverages etc. Receipts of items purchased equal to the value of funding received must be provided.
  • The NFP must aim to: take photos at the luncheon; tag Council on social media/other media forms; measure the number of participants etc. Evidence, including photo evidence, must be provided.

The agreement between Council and the NFP includes a clause which states the recipients are required to spend the total amount of funds received on eligible items for the luncheon. In the event the luncheon does not take place then the recipient will be required to repay the funds to council.

Is GST applicable to this funding?


Based on the background information you have provided it appears that the arrangement is one where GST will apply. The reason for this is that the conditions attaching to the provision of the funding appear to result in the NFP agreeing to enter into binding obligations in return for the funds. The supply of these obligations by the NFP for funding would constitute a supply for GST purposes (note: ‘supply’ is defined under s 9-10 of the GST Act to include an entry into, or release from, an obligation to do anything; or to refrain from an act; or to tolerate an act or situation).

We note that this outcome is consistent with comments on the ATO website regarding grant funding, as follows:

Grant funding

Often organisations secure funding from government bodies, foundations and private purpose funds.

If your organisation is registered, or required to be registered for GST it may have to pay GST on the funding payment it receives.

Example: Payment for services

A government department grants funds to an NFP organisation that operates a counselling centre. The organisation is registered for GST. There is a binding agreement between the department and the organisation that requires the organisation to provide daily counselling services to the general public, using fully qualified counsellors. The organisation must use the funds to provide the services, otherwise it must repay the funds to the department. The organisation must also repay any unspent funds at the end of the period covered by the agreement.

The NFP organisation makes a supply of an obligation to provide counselling services, and the funding is payment for the supply. The organisation is required to pay GST on the amount of funding received.

If the conditions/criteria imposed by the DGR did not constitute a binding obligation on the NFP, the result may be different. Again, this is consistent with an example provided on the ATO website regarding grant funding:

Example: No payment for services

A foundation provides financial support to various organisations that provide developmental opportunities for disadvantaged young people through sports. One such organisation is the Southside Youth Centre. The centre is registered for GST. The foundation admires the work of the centre and wants to help. After discussions with the centre about its financial needs, the foundation agrees to make a payment to the centre. Although the foundation expects the centre to use the money to further its activities, the centre is under no obligation to use the money for any particular purpose.

In this case the organisation is not making a supply to the foundation because it has not entered into a binding obligation to do anything, nor provide anything else in exchange for the payment. The foundation has only a mere expectation that the organisation will use the money to further its activities. An expectation is not enough to create a supply by the organisation to the foundation. The organisation is not required to pay GST on the payment received.

Further information and clarification regarding the Tax Office’s view of the GST treatment of funding can be found in GSTR 2012/2 (Goods and services tax: financial assistance payments).


This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.