The ATO has released two rulings which provide guidance on
the GST implications of certain property transactions made
Taxation Ruling GSTR 2008/3 provides guidance in relation to
the GST implications for the trustee and beneficiary in a bare
trust arrangement. The ruling provides that where a property is
held on bare trust and is later sold or leased to a third
party, it is the entity carrying on the enterprise that makes
the taxable supply and is thus subject to GST. Hence, where the
trustee acquires a property that is held for a beneficiary that
is carrying on an enterprise, there will be GST implications
for the beneficiary rather than the trustee upon the
acquisition, sale or lease of the property. The Ruling provides
numerous examples, of which have been summarised in Appendix A
The ruling only applies to bare trusts or similar trusts
where the trustee has limited active duties and acts solely at
the direction of the beneficiary beneficiaries. Hence, at the
time of setting up a trust, it is important to carefully decide
on an appropriate trust arrangement with regard to the possible
GST implications that could arise.
Draft Determination GSTD 2008/D2 discusses whether an
inspecie distribution (i.e. supply of trust property other than
money) of an asset by a discretionary trust to a beneficiary
would be a taxable supply in accordance with section 9-5 of the
GST Act. The draft determination states that an in-specie
distribution of an asset that is applied or intended to be
applied in an enterprise carried on by a discretionary trust to
a beneficiary is made in the course of furtherance of the
trust's enterprise and is thus a taxable supply. The
draft determination adopts a broad meaning of the
phrase' in the course or furtherance of' to
ensure it encompasses supplies made in connection with the
enterprise. Hence, when considering making an in-specie
distribution of an asset from a discretionary trust to a
beneficiary, due consideration should be given to the GST
consequences that will arise.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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