Q&A 5 February 2004
Question: Is it compulsory for a self-managed superannuation fund (SMSF) to register for GST? If not, is there any advantage in doing so?
Answer:An SMSF is only compelled to register for the GST where the annual turnover of the fund is in excess of $50,000. Annual turnover includes:
• rental income from business real property (not residential property);
• lease income (eg. where a fund leases plant, equipment or motor vehicles);
• any fee the fund charges for salary continuance insurance; and
• rental income from residential property where the lease was signed before December 2, 1998, and continues past July 1, 2000.
Annual turnover excludes:
• superannuation contributions and investment income;
• administration fees;
• fees relating to the provision of death/disability insurance;
• any rents from residential property; and
• any receipts from the sale of CGT assets.
Even if not compulsory, it may be beneficial for some SMSFs to register for the GST in order to claim input tax credits paid in relation to the fund’s expenses. This may be advantageous where the (generally reduced) input tax credits exceed the compliance costs associated with registering.
If a fund registers for the GST, the SMSF will still pay GST on most of its expenses, it will charge GST on its commercial income, lodge a quarterly Business Activity Statement (BAS) and pay the GST collected less any input tax credits.
If an SMSF doesn’t register for GST, there will be no refund of any GST payable in relation to fund expenses, which may result in higher overall expenses.
However, the benefit of not registering for GST is simpler administration, as the fund will not have to comply with GST record-keeping requirements, lodge any BAS, charge GST on its commercial income, or pay associated professional fees.
The final decision regarding whether an SMSF should register for the GST should be referred to a tax specialist.
Justine Harris is manager technical services,Integratec.
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