CRC and in-kind – GST fact sheet 6
Fact Sheet
1.0 Overview
CRC’s generally require the Universities to make “in-kind” contributions in the way of research staff or equipment to the CRC. The ATO has indicated that in kind contributions will generally be viewed as a barter arrangement for OST purposes as there are two supplies.
An “in-kind” contribution made by RMIT University can be viewed as a two-way transaction:
a. RMIT is “purchasing” a share in the CRC, or more specifically the research results or intellectual property that the CRC may produce; and
b. The CRC is ‘“purchasing” the “in-kind” from RMIT, being, facilities or research services.
RMIT is a participant in seven CRCs in respect of research activities. Technically, tax invoices are required to enable GST to be issued in respect of each of the two-way transactions to calculate the GST correctly. RMIT can enter into RCTI agreements (refer to Section 5.0) to make this process easier.
2.0 How are in-kind transactions treated?
There is no specific GST legislation or rulings in respect of CRCs or “in-kind” transactions. However Goods and Services Tax Ruling GSTR 2000/1l-Grants of Financial Assistance, indicates that Grants “in-kind” are supplies where they are made in return for another supply (eg. access to the right to use Research outcomes) and there will be two supplies.
Where CRCs are transacted in-kind, there will be two GST transactions. Hence, GST will be paid by both parties for the supply, and 1/11th of each supply must be remitted to the ATO (ie. both RMIT and the other party will have to remit GST to the ATO). However, both RMIT and the other party will be entitled to an input tax credit, hence no real tax liability will exist in the final analysis. This is assuming that the transactions are performed at arm’s length resulting in each party’s tax liability having an offsetting input tax credit.
3.0 Timing
While CRCs in-kind may work well where both supplies occur in the same accounting period, there seems to be concern as to whether this will always be possible.
These concerns are as follows:
- Supplies can be lumpy (eg. provision of a piece of machinery; provision of end product of project) or continuous (eg. provision of staff time; provision of research work). Where a CRC involves the exchange of either lumpy or continuous supply, it will be harder to arrange for both to occur evenly in the same accounting period.
- To define the nature of the supply, this issue must be pursued further with the ATO. Ultimately, both supplies will offset one another.
4.0 Business Activity Statements (BAS)
The supplies can be seen as simultaneous in an “in-kind” contribution situation. The contributor is buying into the CRC and providing services or facilities to the CRC at the same time. As each party is acting as both purchaser and supplier, the CRC and the contributor will be required to account for 1111th of the value of an in kind contribution in their BAS. Both parties should also be able to claim an input tax credit for 1/11th of the value of the contribution, as this is the amount of GST that they “paid” on their respective purchases. The GST accountable to the ATO and the input tax credits claimed should therefore net out at zero on each parties’ BAS.
5.0 Tax invoices and Recipient Created Tax Invoices (RCTIs)
Under a CRC in-kind agreement, there will be two supplies. Therefore, both RMIT and the other party will be required to issue each other with a tax invoice. To simplify the matter, where both parties are registered for GST, it is suggested that only one party issues a tax invoice, and at the same time issues a RCTI.
Goods and Services Tax ruling GSTR 2000/17 - Tax invoices allows the recipient to issue a document that combines a RCTI and a tax invoice. Therefore, a single tax invoice for both supplies combined on the one document will be in the approved form. However, each entity must account for the full amount of GST payable on the supply that it makes.
To be able to provide a recipient created tax invoice, both the purchaser and supplier will be required to enter into a “Recipient Created tax Invoice Agreement”. Refer to RCTI fact sheet for further details.
6.0 CRCs with RMIT
RMIT is a participant in the following seven C R C s:
- CRC for Polymers;
- Australian telecommunications CRC;
- CRC for Micro Technology;
- CRC for Manufacturing Systems and Technology;
- CRC for Water Quality;
- CRC for advanced Composite Structures
- CRC for Photonics