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Business Tax Tip – GST and Sale of Business Assets
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Published on Thursday, 19 January 2023 10:14
As a business owner you may buy and then sell equipment or machinery and need to know that there is GST on sale of business assets.
A capital asset is an asset retained by an enterprise for the purpose of earning revenue. A capital asset is not intended for sale in the ordinary course of business.
GST Law
The GST law states a business must remit 1/11th of any income from a taxable supply. 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 applies even though the sale might not be within the regular trading practices of the business.
Example
For example 1/11th of the price received for the sale of a business vehicle must be remitted to the ATO as GST and report the sale amount at G1 on the BAS form. This is so, even if the vehicle has been depreciated, or purchased before GST law began on 1st July 2000 or purchased brand new in 2000/2001 and no input credit (for GST paid) was claimable on the purchase.
This also applies to a business selling off some of its plant.
Please note the above refers to income not funds received by way of a loan.
There are also 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.
For more detail, see the ATO page – GST and the Disposal of Capital Assets
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