GST and the disposal of capital assets

What is a capital asset?

A capital asset is generally an asset which is retained by an enterprise for the purpose of earning revenue. A capital asset is not intended for sale in the ordinary course of business.

Capital assets include things like:

• motor vehicles
• manufacturing machinery
• office equipment
• land and buildings.

For more information about capital assets, refer to paragraphs 31-36 of Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover.

Do you have to register if the sale of a capital asset brings your turnover above the registration turnover threshold?

You are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the turnover threshold of $75,000 (or $150,000 if you are a non-profit body).

To decide if your GST turnover meets the turnover threshold, you must examine your current and/or projected GST turnover. In working out your projected GST turnover, you do not include amounts received for capital asset disposals. Therefore, entities that are not registered for GST are not required to register for GST merely because the sale proceeds of a capital asset is $75,000 or more (or $150,000 or more for non-profit entities).