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Mclowd supports automated calculation and recording of GST on relevant sales and purchase transactions.
Due to the way financial supplies are taxed, most SMSFs are not required to register for GST.
You must register for GST if your GST turnover is $75,000 per annum or more, but GST turnover does not include input-taxed sales, such as financial supplies and renting or selling residential property. SMSFs mainly make input taxed sales. You may choose to register for GST, but in making this decision, you need to consider the time and cost of record keeping and reporting and whether or not GST actually applies to the sales and purchases your Fund makes.
Generally, an SMSF will be required to charge GST, and entitled to claim refunds of GST, only on income directly related to commercial or industrial property investments. Therefore, unless your Fund has income in excess of $75,000 per annum from non-residential property, it is likely that registration will not be required. You may still choose to register if you think registration might benefit your Fund.
If you do register for GST, you should enable GST within the Fund Details screen. This will ensure automated calculation and recording of GST receipts and payments.
Completion of BAS returns is not yet automated, but the GST Payable/Refundable account will show GST included on commercial rent receipts (payable), and GST on expenses (refundable) where the user selected ‘Creditable Acquisition’ or ‘Reduced Credit Acquisition’ when processing the transaction.
Please refer to Processing a BAS return for updated instructions on end-of-period GST-return processing.
Note: The information below is general in nature. Trustees users are advised to consult a professional adviser to verify their eligibility to register for GST and entitlement to charge GST and/or claim credits.
If you register your Fund for GST, selecting an annual reporting period will enable an annual GST return to be lodged when the SMSF Annual Return is lodged, reducing the cost of compliance.
Financial Supplies and GST Credits
Financial supplies are input taxed, which means you don’t pay GST on supplies you make and you generally cannot claim credits for the GST included in the price of purchases. However, you may be able to claim credits if you do not exceed the financial acquisitions threshold.
The purchase and sale of shares, receipts of interest, purchase and sale of units in Trusts and Managed Funds, receipts of Trust or Managed Fund distributions, and receipt of member contributions are all classified as financial supplies. Management of an investment portfolio, maintenance of member records, and brokerage on share sales are also financial acquisitions.
GST may be claimable on these purchases if the total GST paid on these purchases is less than 10% of all GST claimable for the period,
AND the total GST credits you could claim for the current month and the next 11 months is less than $50,000 (before July 1 2012) or $150,000 (after July 1 20102). GST may be claimable at a reduced rate (i.e. 75% of GST paid).
GST on tax and auditing services, costs to lodge a tax return, representation in connection with audit activities, costs for tax advice, and costs to respond to ATO inquiries or requests are not classified as reduced credit acquisitions. Neither are accounting services not related to maintaining member, employer or trustee records. Provision of advice and preparation of financial statements (other than those required by regulation) and legal services (including costs to establish an SMSF) are also not reduced credit acquisitions.
Where a Fund invests in both commercial property and a domestic share portfolio, GST claimable may need to be calculated by apportioning the GST paid on expenses. If, for example, 55% of the cost of a reduced credit acquisition relates to management of the commercial property investment, the Fund may be able to claim 55% of the GST paid PLUS 75% of the remaining 45%. For example, if the GST is $100, the Fund might be eligible to claim $88.75 ($55 + (75% x $45)).
Refer to the following table for a quick guide as to purchases on which GST is claimable/not claimable.
Note: Where an accountant or administrator issues an invoice for a mixture of services, the tax invoice must include at least two line items to separate the different services.
Three options for application of GST to an expense:
Users will need to select the correct category for each transaction by reference to legislation and the Fund’s circumstances or by seeking professional advice. It is entirely the user’s responsibility to ensure the correct selection is made and to verify the accuracy of BAS returns and GST refund claims.