Institute of Certified Bookkeepers
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July 2016 Question of the Month - Assets and a De-Registered Company

  • 127 posts
  • # 113409

My client de-registered for GST in December 2015 but continued in business. In July, they sold the car that the company had bought while still registered for GST. Initially I thought they must pay back the proportion of the GST on the sale value received, but because they have de-registered I am not sure if this is correct. What should I do?

  • 172 posts
  • # 113410

I understand that GST based on market value would have been returned to the ATO in the final BAS after GST was cancelled.

The question itself may be a little misleading and could be better phrased -

1. the company itself is not deregistered, only it's GST registration has been cancelled.

2. "sold the car that the company had bought while still registered for GST" might be misread as "sold the car (that the company had bought) while still registered for GST"

Otherwise, I would have thought the company would not be deregistered while it still held assets ?

http://downloads.icbglobal.org/au/ATO/GST_and_the_Disposal_of_Capital_Assets_N7682.pdf

CAPITAL ASSETS HELD WHEN A GST REGISTRATION IS CANCELLED

When a business enterprise cancels its GST registration, it may still hold capital assets on which it has, or is entitled to claim GST credits.

In this situation the amount of GST to be paid is subject to an increasing adjustment to reflect the market value and percentage of business use of the assets at the time the GST registration is cancelled.

The GST should be paid in the final activity statement lodged by the enterprise.

The GST amount payable should be 1/11th of the (percentage of business use times the market value) of the asset.

 

  • 127 posts
  • # 113652

Technically the owner should have paid back the proportion of GST at the time of de-registering for GST. They should have done this increasing adjustment as part of their final BAS. They would have worked out the value of the vehicle at that time, in accordance with the depreciation schedule, and adjusted the GST accordingly.

Calculating the value of the vehicle at the time of cancelling registration for the purpose of ascertaining the GST adjustment value should be done by the tax agent.

If this has been picked up as an omission sometime after cancelling registration, you will need to advise the client and tax agent and ask for direction.

Advise the tax agent in writing and ask whether an adjustment should be done, and if so, ask them to advise the amount of adjustment and the basis for the calculation. If the tax agent advises no adjustment is needed, then follow that advice.

References

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