SMSF - Comm Property and GST on rent

[65fbk]

Hi All,

I think the answer to this is obvious, but would appreciate another opinion..

My SMSF will soon buy a commercial property.
The SMSF is registered for GST, but will only own the one property and the rent will be well below $75k/yr.
My business will rent the property.
The business I will operate from this property will be small, with a turnover under $75k.

If I choose to not register this business for GST, then I assume my SMSF will have to collect GST (because it IS registered) and hand over 1/11th to the ATO and the business will not be able to claim it back?

If I do register the business for GST voluntarily, it will be able to claim back the GST paid on rent?

Have I got that correct? I'd rather not see 1/11th of my rent payments disappear from my SMSF to the ATO. If it is the case, I'll have to crunch the numbers to see if it's worthwhile registering the business for GST...

THANKS,
65fbk.

 

[Scott No Mates]

No it 1/11 of the rent the company pays goes to gst as the company cannot claim for the gst paid as gst credits. All the super fund is doing is to pass on the gst collected.

The gst is not a tax on income but on expenditure.

 

[65fbk]

That's what I meant Scott, thanks..

I guess I'll now need to determine if it's worthwhile registering the business for GST so it can claim back this GST paid on the rent..

 

[DaveM]

Do what a lot of people seem to do... register smsf/trust for gst, buy property, claim back gst, de-register for gst. Then just do all rent with no GST applicable.

 

[65fbk]

Well I did wonder about that Dave..
It seemed so obvious that I figured the ATO would have something in place to spoil the fun...

It's similar to a small startup business spending up on equipment to get set up, then claiming back the GST and de-registering..
If it's a common practice, then I'm all for it

 

[Redwood]

Hi there,

In Vic, if the property you purchase is a going concern and subject to a lease you will not need to pay GST on the purchase of the property. This is important, as there is a few months or so before you get the money back after lodging your BAS and you will not be able to claim the GST on stamp duty paid.

Ensure the contract of sale reflects going concern (or not) i.e subject to lease and the name on the contract of sale should be correct to avoid stamp duty. Its not likely your SMSF must be registered due to turnover threshold, but worth doing so as mentioned above.

Are you purchasing with finance or outright?

Hope that helps
Cheers, Ivan

 

[GaryT]

Do what a lot of people seem to do... register smsf/trust for gst, buy property, claim back gst, de-register for gst. Then just do all rent with no GST applicable.

It's similar to a small startup business spending up on equipment to get set up, then claiming back the GST and de-registering..
If it's a common practice, then I'm all for it

Fairly obvious but this is not feasable. When you de-register the SMSF you are required to make an adjustment of GST and effectively pay back the GST previously claimed on the purchase as per GSTR 2000/24.

Why was the SMSF registered for GST previously or was this done simply so you could claim the GST back on the purchase?

Options are:
1. Register the business for GST and so save 10% of the rent (less the income tax advantage) per year and cop the extra admin and sale price disadvantage?
2. De-register the SMSF before the sale and cop the extra cost in the SMSF
3. Wait the adjustment period (probably 10 years) and then de-register the SMSF without having to pay back the GST on purchase and cop the extra cost in the business for 10 years.
4. Find a business premise to purchase where the seller is not registered for GST and de-register the SMSF. Less stamp duty and no GST impost for SMSF or the business.

 

[Paul@PFI]

When the SMSF acquires the property it's GST registration issues must be considered. A SMSF l can register for GST then choose to Dereg but can't then ignore GST. Get tax advice not forum opinions.