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Edited version of private advice
Authorisation Number: 1051644607728
Date of advice: 18 March 2020
Ruling
Subject: Goods and services tax and transfer of property
Question 1
Is the proposed transfer of the Property from the Trustee to the Beneficiary a taxable supply in accordance with section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, the proposed transfer of the Property from the Trustee (you) to the beneficiary is not a taxable supply in accordance with section 9-5 of the GST Act.
Section 9-5 of the GST Act provides that you make a taxable supply where the supply is made for consideration, in the course or furtherance of an enterprise that you carry on, is connected with the indirect tax zone and you are registered or required to be registered for GST. The supply will not be a taxable supply if any of the above are not met.
You have told us that the transfer of the Property to the Beneficiary will be made for no consideration. However, section 72-5 of the GST Act provides that a supply to an associate without consideration does not stop the supply being a taxable supply if:
(a) the associate is not registered or required to be registered, or
(b) the associate acquires the thing supplied otherwise than solely for a creditable purpose.
In your case, the Beneficiary of the Trust would be considered to be an associate of the Trustee. The Beneficiary is currently registered for GST. Further the Beneficiary's acquisition of the Property will be for a creditable purpose given the Beneficiary will continue to lease the Property for commercial rent. Hence section 72-5 of the GST Act will not apply in your case to deem consideration.
As the supply of the Property is made for no consideration, section 9-5 of the GST Act will not apply and therefore the transfer of the Property to the Beneficiary will not be a taxable supply.
Question 2
If the transfer of the Property is a taxable supply, than can the Beneficiary claim input tax credits of an amount equal to the GST payable?
Answer
This question is not relevant as the transfer of the Property to the Beneficiary is not a taxable supply.
This ruling applies for the following period:
November 2019 to 30 June 2020
The scheme commences on:
November 2019
Relevant facts and circumstances
The Trustee as trustee for the Trust is registered for goods and services tax (GST).
The Trust was settled by a Trust Deed. A copy of the Trust Deed is provided with this private ruling application.
A deed amending the Trust Deed was executed on XXX1 (XXX1 Deed). The XXX1 Deed required that particular powers in the Trust Deed, including the power to vary the Trust Deed only be exercised with the consent of the Bank.
A Deed of Appointment (DOA) purporting to vary the XXX1 Deed was executed on XXX2. The DOA was executed beyond power, as the consent of the Bank was not obtained, and accordingly was void.
On XXX, a further amending deed was executed (XXX3 Deed) a copy of which is provided with this private ruling application.
The Trustee intends to distribute a property it owns to the Beneficiary.
The Trustee, in its trustee capacity, leases out the Property for rent. The Property is a commercial property and is leased at commercial rates. GST has been payable on the rental.
Individual A died in 201X and in accordance with the XXX3 Deed, the date of Individual A's death was the date of vesting of the Trust.
Under the XXX3 Deed, the Beneficiary was entitled to the Property as at the date of death of Individual A.
The Trustee is now going to transfer the Property to the Beneficiary in accordance with their entitlements under the XXX3 Deed. The supply of the Property to the beneficiary will not be made for any consideration. The Beneficiary will not be giving any money or other property to the Trustee in return for the Property.
The Beneficiary is registered for GST.
Upon registration of the transfer of the Property, the obligations and covenants of the lease of the Property is annexed and incident to the revisionary estate in accordance with sections 141 and 142 of the Property Law Act (Vic) and, accordingly, will be transferred to the Beneficiary.
The Beneficiary will continue to use the Property to derive commercial rent.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 72-5