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16 May 12
GST changes which will affect super funds and MIS

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By Brendan Leighton (Senior Associate)

From 1 July 2012, the Federal Government proposes to amend the GST law so that superannuation funds (other than self managed) and managed investment schemes (MIS) will only be able to claim reduced input tax credits (RITC) for 55% of GST paid on most acquisitions made by the trustee – including, but not limited to, acquisitions made from the trustee in its own capacity as a service provider, in connection with the trust. 

For certain acquisitions which attract GST, the trust will continue to be able to claim a RITC of 75% of the GST paid on the acquisition.  These include:

  • brokerage services
  • certain investment portfolio management functions
  • certain administrative functions
  • custodial services, and
  • master custodial services.

The proposed amendments target trustees bundling all costs incurred on behalf of an applicable trust into a single ‘trustee fee’, which allows the trust to claim a RITC for all acquisitions, including those not otherwise eligible for an RITC.  The introduction of a lower RITC rate for bundled trustee services was favoured for simplicity over other options which would have required the ‘unbundling’ of acquisitions into various components based on the type of acquisition being made and the capacity in which it was made.

A major disadvantage of the proposed amendments is that in most cases the relevant trusts will only be able to claim a 55% RITC.

Obviously, this will have an impact on the balance of investors’ accounts and the manner in which fees and costs are disclosed in product disclosure statements (PDSs).

Trustees of superannuation funds and responsible entities of MIS should review their PDSs and consider whether the proposed changes to the RITC regime warrant updating the disclosure of fees and costs.

 

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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