A sector specialist has confirmed the conditions under which an SMSF must register for GST, emphasising it is mandatory for funds holding commercial property and generating returns above a certain threshold.
“If the property is a going concern, so it’s got a current tenant, then you can get the GST back. If you’re not registered for GST, then it’s just going to add to the cost base of what you’d pay for the building, which is crazy,” SMSF Alliance principal David Busoli told selfmanagedsuper.
“For those holding commercial property yielding at least $75,000 in rent … it’s one of those circumstances where you don’t really have any choice in the matter, you should register.”
Busoli clarified SMSFs not registered for GST will receive income without the impost applied, but once registered, they must collect the tax in certain situations, such as rental income from commercial property, and remit it to the ATO.
While GST on commercial property purchases and related expenses is fully refundable, the treatment of the tax on other expenses varies. Some costs are partially refundable, while others, such as audit fees, may not be refundable at all.
In cases where an SMSF is not required to register for GST, Busoli said it was a matter of evaluating whether it would be beneficial for the fund to do so.
“The issue is that the benefits of registration for GST are a little [unclear]. You don’t really know whether it will be in your best interests or not and that there’s generally an increased workload because there’s more processing,” he said.
“You’ve got to counter your tax deductibility of expenses against foregoing some of that tax deductibility in exchange for some GST refund, but then having the additional cost of doing it all.”
He also addressed confusion within the industry regarding whether a trustee can claim a reduced input tax credit on the GST component of adviser fees.
“Some adviser fees are claimable and some are not. The reality is that the legislation is so convoluted, so complex, that it’s very difficult for anyone to arrange their systems in such a way that they can properly comply because it is so variable,” he noted.
“I think the vast majority of accountants who are doing business activity statement returns for SMSFs would not be doing them 100 per cent correctly.”
