A Hidden Saving in Your SMSF: The Case for GST Registration

GST registration is not something most SMSF trustees consider. It sits outside the usual conversations about contributions strategy, investment allocation, and estate planning. Yet for many funds, it represents a straightforward opportunity to recover a portion of fees paid each year at relatively low administrative cost.

What GST Registration Makes Possible

When an entity is registered for GST, it can claim back the GST component of its expenses as an input tax credit. For most businesses, this means recovering the full 10% GST charged by service providers. SMSFs occupy a slightly different position, because the fees they pay for investment advice and accounting relate to what the tax law classifies as financial supplies, which are treated differently under the GST system.

Rather than claiming the full input tax credit, a GST-registered SMSF can claim a Reduced Input Tax Credit (RITC) of 75% of the GST on eligible fees. In practical terms, for every $1,100 in eligible fees (inclusive of GST), the fund can recover $75.

What Fees Qualify?

The RITC applies to accounting services as well as costs such as brokerage on the purchase of listed securities, whereas management costs charged directly by a managed fund, do not qualify. In practice, the most common eligible fees for an SMSF are ongoing adviser fees, investment advisory fees, and accounting or administration fees charged by the fund’s accountant or administrator. Trustees considering registration should ask their accountant to identify which fees in their fund are eligible before estimating the likely credit.

The Numbers in Practice

The scenario below illustrates how the saving plays out for a trustee couple, Michael and Helen, across three fee levels. In each case, the fund claims an RITC of 75% of the GST component of its eligible fees, and the net saving is calculated after accounting for the additional fee charged by their accountant to administer the fund’s GST obligations. The saving scales directly with fee levels, and the annual credit is recovered at relatively low cost to the fund.

Source: Evans and Partners 

Figures are illustrative only and based on a hypothetical SMSF. Actual amounts claimable will depend on the fund’s fee structure, eligibility for GST registration, and individual circumstances. The underlying nature of each fee type will influence the GST claimable from the ATO. This illustration does not constitute financial advice.

Is Your SMSF Eligible?

Most SMSFs that hold investments and engage professional advisers will satisfy the ATO’s requirement that the fund is ‘carrying on an enterprise’, which is the threshold for voluntary GST registration. Once registered, the fund will need to lodge Business Activity Statements (BAS) on a quarterly or annual basis which can be completed by the fund’s accountant.

Worth a Conversation

GST registration is not appropriate for every SMSF, and the decision depends on the fund’s investment profile, fee structure, and administrative capacity. For funds paying ongoing advice and accounting fees, it is an option worth reviewing. Your accountant can assess eligibility and estimate the net saving based on your current fee structure.