When a GST-registered trust makes a distribution of goods or services to a beneficiary, this will be making a supply for GST purposes. As the beneficiary will be an associated person to the trust, the value of the supply is deemed to be a market value, meaning the trust must account for GST on that basis.
The IRD released an interpretation statement this week setting out a bit more detail about how and when these rules are applied. Of particular interest are some of the statements relating to the time of supply. For property that is not able to be "removed" (such as land and buildings) this is triggered at the time the supply is "made available" to the beneficiary. Often this will be when the trustees make a resolution to distribute property, and may not always coincide with a transfer of title.
For property that can be removed (for example a motor vehicle), the time of supply will be the time of "removal" of the goods. In our view this will not always be a clear-cut answer, especially in cases where the beneficiary has been using the same goods, in carrying on the business of the trust.
The interpretation statement also notes that it is important to remember such supplies also need to be taken into account in determining whether a trading trust has passed the $60,000 threshold for registration.