GST and in specie contributions to a self managed superannuation fund

Is the entity, a sole trader, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an in specie contribution of commercial property to the trustee of a self managed superannuation fund?

No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it makes an in specie contribution of commercial property to the trustee of a self managed superannuation fund.

The entity is a sole trader who is registered for goods and services tax (GST). The entity owns commercial property that it uses in conducting its enterprise.

The entity is a member of a self managed superannuation fund (superannuation fund) which is registered for GST and is a regulated superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 . A trust deed sets out the entity's rights in relation to the superannuation fund. The supply of the initial interest in the superannuation fund was a financial supply under subsection 40-5(1) of the GST Act.

The entity makes an in specie contribution of the commercial property to the trustee of the superannuation fund in carrying on its enterprise. The trustee does not provide any monetary consideration to the entity for the commercial property. The trustee intends to lease out the commercial property, which will be a taxable supply.

Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes the supply for consideration • the supply is made in the course or furtherance of an enterprise that it carries on • the supply is connected with Australia, and • the entity is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 47 of Goods and Services Tax Ruling GSTR 2001/6 provides that there needs to be a supply, a payment and the necessary relationship between the supply and the payment. The transfer of the commercial property from the entity to the trustee of the superannuation fund is a supply, however it needs to be determined if there is any consideration for this supply.

Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. Although, the trustee of the superannuation fund did not provide any monetary consideration for the commercial property, a 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form (paragraph 12 of GSTR 2001/6).

Paragraphs 15 and 16 of GSTR 2001/6 indicate that by providing non-monetary consideration for a supply, an entity is in turn making a supply. As such, if the trustee of the fund is making a supply in response to the contribution of the commercial property it may constitute non-monetary consideration for the supply of the commercial property.

In the case of a self managed superannuation fund, members, or beneficiaries of the fund obtain their rights, or prospective rights in relation to the fund by way of the trust deed that creates the fund. As such, the deed provides the interest in the superannuation fund and from that point onwards the member has acquired an ongoing interest in the self managed superannuation fund, which is a financial supply. Whilst the contribution of the commercial premises may result in an increased level of assets being held in the superannuation fund the contribution does not result in the trustee of the superannuation fund providing a further interest to the entity. Therefore, the only supply the trustee of the superannuation fund has made is the initial supply of the interest in the superannuation fund.

This supply of the initial interest in the fund by the trustee is not a supply made in response, in connection with or for the inducement of the entity's contribution of the commercial property. Accordingly, the superannuation fund does not provide consideration for the supply of the commercial property.

However, under section 72-5 of the GST Act the fact that a supply is made to an associate without consideration does not stop the supply being a taxable supply if: • the associate is not registered or required to be registered, or • the associate acquires the thing supplied otherwise than solely for a creditable purpose.

'Associate' is defined in section 195-1 of the GST act as having the meaning given in section 318 of the Income Tax Assessment Act 1936 (ITAA 1936). In relation to a natural person, the term associate is defined in section 318 of the ITAA 1936 to include a trustee of a trust where the person benefits under the trust. The entity, a sole trader, is a beneficiary of the superannuation fund (a trust) and as such, is an entity that benefits under the superannuation fund. Therefore, the entity and the trustee of the superannuation fund are associates.

The trustee is registered for GST and intends to lease out the commercial property which will be a taxable supply under section 9-5 of the GST Act. Therefore, the trustee of the superannuation fund has acquired the commercial property for a creditable purpose and neither of the requirements of section 72-5 of the GST Act are satisfied.

As there is no consideration for the supply, paragraph 9-5(a) of the GST Act is not satisfied. Therefore, the entity is not making a taxable supply under section 9-5 of the GST Act, when it makes an in specie contribution of commercial property to a self managed superannuation fund.