GST implications when employer pays for a super fund's expense

An employer cannot claim an input tax credit where it pays an expense on behalf of a superannuation fund, as the supply is not made to the employer; but to the super fund.

However, if the fund is registered for GST, then it may be entitled to claim an input tax credit (or a reduced input tax credit if the requirements in Division 70 of the GST Act are otherwise satisfied). For example, assume a super fund engages a legal firm to provide advice about its activities, but the employer connected with the super fund pays the legal fees associated with this advice.

Because the supply of the advice was made by the legal firm to the super fund, the employer is not entitled to an input tax credit (i.e., the employer has not 'acquired anything', even though it made the payment). However, depending on the circumstances and whether the super fund is registered for GST, it may be entitled to a full or reduced input tax credit.

The rules relating to GST are more complicated for super funds than for other entities, so please phone our office if you would like discuss this important issue.