You have set up a trust. The trust has its own ABN. The business is starting to grow. Customers are coming in. Invoices are going out. Then someone asks: “Is the trust registered for GST?”
This is where things can get a little confusing. A trust is not quite the same as a sole trader or a company. There is a trustee involved. And when GST registration comes into the picture, the trustee has an important role to play.
So let’s break it down.
Does Every Trust Need to Register for GST?
No. Simply having a trust does not mean you automatically need to register for GST. The trust needs to be carrying on an enterprise.
For most businesses, GST registration becomes compulsory when the relevant GST turnover reaches $75,000 or more. There are some exceptions.
For example, the GST registration threshold for eligible not-for-profit organisations is generally $150,000. But for an ordinary trading or business trust, the $75,000 threshold is the number most people need to keep in mind.
Is the Trust or the Trustee Registered for GST?
This is one of the first things that confuses people. You might look at the paperwork and think: “The trust has no legal personality. So who actually registers?” For GST purposes, it is the trustee in its capacity as trustee of the trust that registers. The trustee is the entity that carries on the trust’s enterprise and is registered for GST in that capacity.
For example, you might see an ABN registration showing something like: ABC Pty Ltd as Trustee for the Smith Family Trust. The trustee is acting in its capacity as trustee for that particular trust. This is important when dealing with GST records and invoices.
The Trust’s GST Turnover Matters
Let's say you have a family trust running a business.
During the year, the business makes: Sales: $90,000.
The business expenses are: $60,000.
The profit is: $30,000.
You might think: “The trust only made $30,000 profit, so GST shouldn't apply.”
But GST registration is not based on profit. The relevant figure is the trust’s GST turnover. So if the GST turnover is $90,000, the trust needs to review its GST registration requirements.
What If the Trust Is New?
This is where you should keep an eye on things from the beginning. A new trust does not necessarily have to wait until it has actually received $75,000. Your expected turnover can also matter.
For example, the trust starts a property development business. It enters into contracts that are expected to generate more than $75,000 in relevant turnover. Even though the business is new, the expected turnover may mean GST registration needs to be considered.
So don’t wait until the bank account reaches $75,000. Look at where the business is heading.
Can a Trust Register for GST Voluntarily?
Yes. If the trust is carrying on an enterprise but is below the compulsory registration threshold, it can generally choose to register for GST. This can sometimes make sense.
For example, the trust may have significant business purchases. It may buy equipment. It may pay for professional services. It may purchase stock. If those purchases are eligible, the trust may be able to claim GST credits.
But voluntary registration also brings extra responsibilities. The trust will generally need to:
- Charge GST on taxable sales.
- Keep proper GST records.
- Lodge BASs.
- Account for GST collected.
- Claim eligible GST credits.
So voluntary registration is not simply about getting GST credits. You need to consider the whole picture.
What Happens After GST Registration?
Once the trust is registered for GST, GST becomes part of its regular business reporting.
For example, the trust provides consulting services for: $5,000 before GST.
GST: $500.
Customer pays: $5,500.
The $500 GST collected needs to be accounted for through the trust's GST reporting.
At the same time, the trust may be able to claim eligible GST credits on its business purchases.
Can a Trust Claim GST Credits?
Yes, if the relevant requirements are satisfied. For example, the trust purchases equipment for: $3,300 including GST. The GST component is: $3,300 ÷ 11 = $300. If the equipment is used for the trust’s business and the other GST requirements are met, the trust may be able to claim the $300 GST credit.
But remember: Not every trust expense automatically gives rise to a GST credit. The GST treatment of the purchase still needs to be checked.
What If the Trust Owns a Rental Property?
This is where things can become more complicated. Not every activity carried on through a trust is treated the same way for GST.
For example, certain residential rental activities are input taxed. That can affect whether GST is charged and whether GST credits can be claimed on related expenses. So if your trust simply owns residential investment property, don’t assume: “The trust has an ABN, so it must charge GST.” The nature of the activity matters.
What If the Trust Sells a Property?
Property transactions can have very different GST outcomes. A sale of a residential investment property can have different GST treatment from a property development business selling new residential premises. There can also be issues involving:
- Commercial property.
- New residential premises.
- Vacant land.
- Property development.
- The margin scheme.
- Going concern transactions.
So if a trust is buying or selling property, don’t treat the GST calculation as an afterthought. Check the GST position before the transaction takes place.
Keep the Trust’s Records Separate
This is especially important where the trustee also runs other businesses. For example, the same company might be: ABC Pty Ltd and also: ABC Pty Ltd as Trustee for the Smith Family Trust. These can represent different capacities of the trustee.
The records need to clearly distinguish the trust’s activities from the trustee’s own activities and from any other trust for which the trustee acts. The ATO recognises the trustee in each capacity as a separate entity for these purposes. So don’t mix everything together just because the same company is involved. Keep the bookkeeping clean.
What Should Appear on Trust Invoices?
When the trustee is registered for GST in its capacity as trustee, the relevant trust entity and ABN should be properly identified on tax invoices.
For example, an invoice might identify: ABC Pty Ltd as Trustee for the Smith Family Trust along with the ABN associated with the trust’s GST registration. This may seem like a small detail. But getting the entity name and ABN right helps keep your GST records consistent.
What About Trust Distributions?
This is another area where people sometimes confuse income tax and GST. A trust may distribute income to its beneficiaries. But a trust distribution is not automatically a taxable supply for GST purposes. GST generally looks at supplies made in carrying on an enterprise.
So don’t treat every amount appearing in the trust’s accounts as a GST transaction. The nature of the transaction matters.
What About Multiple Trusts?
Suppose you have two separate family trusts. The same company acts as trustee for both. That does not mean you can simply combine everything into one GST registration. The trustee can be treated as a different entity in each capacity.
So: Trust A and Trust B need to be considered separately where they are separate entities and carry on separate enterprises. This is particularly important when the same trustee company is involved in several trusts.
A Simple Example
Let's say the Smith Family Trust operates a consulting business.
Its turnover is currently: $65,000.
So far, it is below the general $75,000 threshold.
Then the trust signs a new contract worth: $25,000.
The expected turnover now becomes: $90,000.
This is the point where the trustee should review the trust’s GST registration position. Don’t wait until every dollar has been received. The expected turnover can matter.
The Bottom Line
A trust does not automatically need to register for GST just because it has an ABN. For most business trusts, the key threshold is $75,000 GST turnover. If the trust is below the threshold, voluntary registration may be an option.
If the trust reaches, or is expected to reach, the threshold, GST registration may become compulsory. And remember the important distinction: The trustee registers for GST in its capacity as trustee of the trust.
So keep the trust’s records separate. Track its turnover. Check the GST treatment of its activities. And don’t forget that property and rental activities can have very different GST rules. Because with trusts, there is already enough paperwork to deal with. GST should not be the surprise waiting for you at the end of the year.