Private ruling: GST and Superannuation Funds
Published: March 2015

Ruling: Q1: Is the in-specie distribution of the Property by the Superannuation Fund, to the member, a taxable supply? | A1: Yes

Relevant facts and circumstances: The Superannuation Fund (the Fund) is registered for Goods and Services Tax (GST). The Trustees of the Fund are considering transferring the Property, held by the Fund, to a member of the fund, by way of an in-specie distribution. You have advised that the member is registered for GST. You have further advised that he will not acquire the property for a creditable purpose and that no consideration will be given for the supply of the land to him. The property is a vacant Lot. It was originally purchased with the intention of developing the Property but this did not eventuate. The Fund has never conducted any commercial activity on the Property and has not received any rent in respect of the Property.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | 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

Reasons for decision: Summary: In this ruling, please note: • All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise specified. • All terms marked by an *asterisk are defined terms in the GST Act. Section 9-40 provides that you are liable for GST on the taxable supplies that you make. Section 9-5 states: You make a taxable supply if: (a) you make the supply for *consideration (b) the supply is made in the course or furtherance of an *enterprise that you *carry on (c) the supply is *connected with Australia; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. 'Supply' is defined in subsection 9-10(10) to include any form of supply whatsoever. In this case, the in-specie distribution by the Superannuation Fund (the Fund) to the member is a supply. 'Consideration' is defined in paragraph 9-15(1)(a) to include any payment, or any act or forbearance, in connection with a supply of anything. In some trust arrangements, beneficiaries have indefeasible rights to trust property. Clause XX of the Fund confirms that the beneficiaries of this fund do not have such an indefeasible right. In the case of a discretionary trust, a beneficiary does not have vested interest in either the income or the assets of the trust. The beneficiary merely has a right to demand that the trustee administers the trust according to the trust deed. As such, when the trustee makes a distribution, the beneficiary has no rights to surrender and gives no consideration. This is the position when the Fund makes an in-specie distribution to the member. Although the supply is not being made for consideration, a distribution made by a discretionary trust may still be a taxable supply. Section 72-5 of states: (1) The fact that a supply to your *associate is without *consideration, does not stop the supply being a *taxable supply if: (a) your associate is not *registered or *required to be registered; or (b) your associate acquires the thing supplied otherwise than solely for a *creditable purpose. The term associate, which is defined in section 318 of the Income Tax Assessment Act 1936 includes a beneficiary and the trustee of a trust. In this case, the trust is making an in-specie distribution to a beneficiary (the member) who is registered for GST. However, the distribution will not be used solely for a creditable purpose. Therefore, the supply meets the requirements of section 72-5. Consequently, the trustee for the Fund is registered for GST and the in-specie distribution of the Property is a 'supply 'that fulfils all of the requirements of section 9-5 and section 72-5. Furthermore, the supply is neither GST-free under Division 38 nor input taxed under Division 40. Therefore, the entity is making a taxable supply under section 9-5 when it makes an in-specie distribution to the member who is registered for GST but the acquisition is not solely for a creditable purpose.