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Business Tax Tip – How to understand GST on the sale of assets

images/Business Tax Tips.PNGMany business owners aren’t sure and want to understand GST on sale of an asset (business asset).

The GST law states a business must remit 1/11th of any income from a taxable supply.

If you are registered for GST - or required to be – the goods and services you sell in Australia are taxable unless they are GST-free or input taxed.

Put another way, a taxable supply is any item not GST free or input-taxed.

Examples of GST free items are exports, medical supplies, basic food, plain milk and water.

Examples of input-taxed items are interest and dividends.

So if the business receives income from any item other than these, GST probably applies even though the sale might not be within the normal trading practices of the business.

For a sale to be taxable, it must be made for payment. This is usually monetary but can be another form of payment, such as:

  • Payment in the form of refraining from doing something.

For example 1/11th of the price received for the sale of a business vehicle must be remitted to the ATO as GST. This is so even if the vehicle has been depreciated. The above also applies to a business selling off some of its plant. See GST and the disposal of capital assets.

Please note the above refers to income not funds received by way of a loan. There are special rules regarding the sale of a business. These special rules apply to Goodwill, Plant, Motor Vehicles and Business Premises sold as part a business that is a going concern. It is important to consult an accountant before signing any contract to sell a business without paying GST as the special rules have a few traps.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Email i This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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