ATO Interpretative Decision

ATO ID 2005/70

Goods and Services Tax

GST and in specie contributions to a self managed superannuation fund
FOI status: may be released
  • With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

Status of this decision: Decision Current
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

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?

Decision

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.

Facts

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.

Reasons for Decision

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.

Date of decision:  20 August 2004

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-5(a)
   subsection 9-15(1)
   subsection 40-5(1)
   section 72-5
   section 195-1

Income Tax Assessment Act 1936
   section 318

Superannuation Industry (Supervision) Act 1993
   the Act

Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2001/6

Keywords
Goods and services tax
GST consideration
GST superannuation funds

Siebel/TDMS Reference Number:  3832747

Business Line:  Indirect Tax

Date of publication:  11 March 2005

ISSN: 1445-2782