Do I need to register my SMSF for GST?

If the SMSF earns less than $75,000 in annual revenue, then the short answer is no. The long answer is a little more complicated. If you have an SMSF and it’s earning an income from business enterprises in excess of $75,000 per annum, then you’ll need to register for GST. In most cases, income derived from business enterprises is usually only the rent received from a commercial or business property. An SMSF that receives rent from a residential property doesn’t count towards the $75,000 annual turnover threshold.

It’s important to note that the ATO defines $75,000 of income as gross revenue, not net income after expenses. So if a commercial or business premises is held with an SMSF and the gross income is more than $75,000 a year, then the SMSF must register for GST.

If the commercial property held by an SMSF earns less than $75,000 in gross income per annum, then you don’t need to register for GST.

THE GIST OF THE GST

In cases where the SMSF owns a commercial or business premises, an SMSF trustee may voluntarily elect to register for the GST. By doing this, the SMSF will have to charge GST on any rental income received, and this will have to be remitted to the ATO. On the flip side, the SMSF can then choose to claim GST on certain expenses, solely related to the property.

When it comes to claiming GST on an SMSF, it’s not a hard-and-fast rule of 10% in and 10% out. While the majority of expenses incurred by an SMSF will include GST, the law only allows an SMSF to claim back a reduced portion of the GST. Depending on the cost, none of the GST can be claimed.

SMSF trustees considering registering for GST voluntarily should be mindful of the extra costs and reporting involved. Before jumping to conclusions, always seek independent and qualified SMSF advice to ensure the costs of registering an SMSF for GST don’t outweigh the benefits.

To paint a more accurate picture, an SMSF can only claim 75% of the GST paid on investment management fees, actuarial fees and brokerage fees.

No GST can be claimed or refunded on accounting fees for the preparation of income tax returns and BAS, audit fees, legal fees and expenses relating to a residential property. 

Where an SMSF owns commercial premises and is registered for the GST, then GST must be charged on the rent and paid to the ATO. In these cases, the GST component of any expense relating to the commercial property can be claimed by the SMSF. 

TO SUM IT UP

Unless your SMSF is earning more than $75,000 per annum in rent from a commercial property, there’s little value in voluntarily registering for the GST. Realistically, you may be able to make a reduced claim, but when you take into account all the additional costs and compliance factors, it doesn’t add much value.

Culburra Beach Accounting & Tax SMSF advice

Depending on your financial situation, a self-managed super fund (SMSF) can give you more control over your superannuation and retirement. Everybody’s finances and future needs are different, so an SMSF may not suit all. With complicated rules and strict governance in place, those looking at opening an SMSF should always seek qualified and experienced advice. 

The H&R Block SMSF Solutions team can provide you with a full range of SMSF services to help you set up, manage and maintain your SMSF.

Disclaimer: The information provided is general in nature, and as such it should not be relied upon for making decisions without seeking expert opinion or personal advice. Culburra Beach Accounting & Tax  disclaims all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable, for any loss or damage whatsoever (including human or computer error, negligent or otherwise, by one or more of the authorities, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the information or advice provided. The user must accept sole responsibility associated with the use of the material in this article, irrespective of the purpose for which such use or results are implied. The information applies the law as stated at the time of writing, and is no substitute for financial advice.