(Supplement to the Department Circular 2 'Recipients of Funding from the Department ')
This Department sheet is designed to inform service providers of the potential GST treatment of various payments made under the Commonwealth Disability Services Program.
- Commonwealth Funded Disability Services Program
- Invoice driven or fee for service payments
- Further information
This Department sheet should be read in conjunction with the Department circulars 1 and 2, which contain general the Department policies on tax reform. In particular, these circulars advise that service providers must have an Australian Business Number (ABN) to do business with the Department. They also contain general information and explanations about registration for GST, Income Tax Exempt Charity (ITEC) status, tax invoices, recipient created tax invoice arrangements for grants and sources of additional advice. Copies of the circulars can be obtained by contacting your state or territory office or by telephoning the the Department's Tax Manager on (02) 6244 8647.
Commonwealth Funded Disability Services Program
The Department makes a broad range of disability payments.
Disability payments are in respect of:
- employment assistance
- print disability
- information services
- carer respite services
- consumer training and support
- case based funding
All of these payments are consideration for a taxable supply and subject to GST if the grantee is registered for GST.
This means that all GST registered providers receiving payments from the Department must remit one eleventh of each payment to the Australian Taxation Office (ATO).
This Department sheet is focussed on the transactions between the Department and service providers. It is not providing advice on third party transactions between service providers and other organisations or clients. For further information on the tax treatment of third party transactions please contact the ATO on 13 28 66.
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Most payments provided by the Department are grant payments. These include payment for employment assistance, advocacy, print disability, information services, carer respite services, wage subsidies and consumer training and support.
A number of grant payments are consideration for a taxable supply where the service provider is registered for GST. That is, the service provider will need to remit one eleventh of each payment to the ATO. The Department will 'gross up' these grants by 10 per cent. Consideration should be given to the applicability of GST to each specific grant payment.
The amount and timing of grant payments is generally fixed in advance and set out in a payment schedule attached to a funding agreement. Given the nature of these payments, the Department funding agreements authorise the Department to generate invoices on behalf of the service provider. These are called recipient created tax invoices or RCTIs. (In this case, the Department is the 'recipient' of the 'supply of services' from the organisation or outlet.)
Invoice driven or fee for service payments
Invoice driven or fee for service payments made by the Department are made following the receipt of a valid tax invoice from the service provider. The invoice determines the amount and timing of the payment. These types of payments include: supported wage system, workplace modifications, supported employment placement officers and disability recruitment coordinators. These payments will be subject to GST if the service provider is registered.
A tax invoice should include:
- a description and quantity of the goods or services supplied
- the price of the goods or services supplied
- the GST component of that price, or a statement that the price is inclusive of GST
- your organisation's name and ABN
- The Department's name and ABN (36 342 015 855) or address (if the invoice is for an amount greater than $1000), and
- the words 'tax invoice'
Refer to Section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999.
For the purposes of disability services payments, the FaCSIA ABN which should be shown is 36 342 015 855/002.
If the service provider is not registered, they should submit a standard invoice with a price that does not include GST. For administrative reasons, the Department is asking that this invoice display the organisation's ABN so that we can be sure there is no obligation on us to withhold part of this payment under the Taxation Administration Act 1953.
See Circular 2: Recipients of Funding from the Department for more information about tax invoices and the PAYG withholding tax requirements.
People considering issues relating to the application of the GST should not solely rely on the information in this Department sheet. Further, comprehensive advice relevant to your particular circumstances should be obtained either from the Australian Taxation Office or from an appropriate professional advisor.
If you have any questions about this Department sheet, telephone the the Department's Tax Manager on (02) 6244 8647.
We cannot help you with general tax questions and cannot provide tax advice. We can explain what this Department sheet means and what you will need to do to ensure that you can receive, and continue to receive, funding from the Department.