Any asset you retain within your business for the purpose of generating revenue is a capital asset.
When you dispose of such an asset in the course of carrying on your business in Australia it is generally regarded as a taxable sale which means you are required to account for the GST on the sale thus an amount must be reported on G1 on your business activity statement.
Capital assets commonly include motor vehicles, manufacturing machinery, office equipment, land and building. In certain situations you may be entitled to a decreasing adjustment when you dispose of a capital asset that you purchased or subsequently used in the course of your business.
The reducing adjustment reduces the net amount of GST you are liable to pay for the tax period thereby freeing up some cash-flow for your business.
Capital assets which are part of a business sold as a GST-free going concern, residential premises or farm lands (the land must be land on which a farming business has been carried on for at least the five years before the disposal, and the purchaser must intend that the land will continue to be used for a farming business) are not accounted for on GST upon disposal.
Entities or organisations which are endorsed charitable institutions or deductible gift recipients, government schools or a non-profit sub-entity of the above organisations can have their disposal GST-free if their capital assets were disposed under certain conditions such as –
If payment or considerations received for the disposal of the capital asset is less than 50% of the GST inclusive market value of the asset or
Payment or considerations received is less than 75% of the amount paid (or liable) to purchase the asset being sold – generally the original cost of the asset.
For an appointment, or a confidential discussion of your needs, please contact our Tax Accountants today, or call 1300 627 829.
