GST and the disposal of capital assets

How do you account for GST on capital assets held when your GST registration is cancelled?

If you cancel your GST registration and you still hold capital assets on which you have claimed or are entitled to claim GST credits, the amount of GST you are liable to pay is subject to an increasing adjustment. The increasing adjustment takes into account the market value and percentage of business use of the assets at the time your GST registration is cancelled. The GST should be paid in the final activity statement you lodge.

The GST payable is:

Example 4

Calculating the increasing adjustment on capital assets to be shown in your final activity statement

Mr Sample ceases business and cancels his GST registration. He has a motor vehicle on hand that has a market value of $22,000. Mr Sample claimed GST credits for this motor vehicle in an earlier activity statement. The vehicle is used 80% for business purposes.

The GST payable by Mr Sample is:

= 1/11 x ($22,000 x 80%)

= $1,600