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  • Issue 11 Turnover

    11.1 Is an enterprise that has an annual turnover less than $50,000 required to register if it disposes of assets of the enterprise?

    Whether you are required to register is determined by your annual turnover. You must calculate both your current annual turnover and your projected annual turnover to determine whether you have an annual turnover that meets, or does not exceed a turnover threshold. If your current annual turnover is at or above $50,000 but your projected annual turnover is below $50,000 you will not meet the registration turnover threshold. (The registration turnover threshold for a non-profit body is $100,000.)

    Current annual turnover generally, is the sum of the values of all supplies that you made or are likely to make, during the current month and the preceding 11 months. The disposal of an asset is a supply included in current annual turnover. Projected annual turnover generally, is the sum of the values of all the supplies that you made, or are likely to make, during the current month and the next 11 months.

    Section 188-25 provides that in working out projected annual turnover you disregard the following supplies made or likely to be made:

    • supplies by way of transfer of a capital asset,
    • supplies solely as a consequence of ceasing to carry on an enterprise, and
    • supplies solely as a consequence of substantially and permanently reducing the size or scale of your enterprise.

    Therefore, providing the assets disposed of fall within the exclusions in section 188-25, an enterprise with an annual turnover less than $50,000 will not need to register solely because they dispose of assets of the enterprise.

    Draft goods and services tax ruling GSTR 2001/D1 titled "How does section 188-25 affect the calculation of 'projected annual turnover' for the purposes of the GST Act?" provides guidance on the calculation of annual turnover and the types of supplies to be excluded from projected annual turnover.

    11.2 What types of supplies will be disregarded in calculating projected annual turnover for the purposes of section 188-25?

    Section 188-25 provides that in working out projected annual turnover you disregard the following supplies made or likely to be made;

    • supplies by way of transfer of a capital asset,
    • supplies solely as a consequence of ceasing to carry on an enterprise and
    • supplies solely as a consequence of substantially and permanently reducing the size or scale of your enterprise.

    The Commissioner has issued draft goods and services tax ruling GSTR 2001/D1 titled "How does section 188-25 affect the calculation of 'projected annual turnover' for the purposes of the GST Act?" This draft ruling provides guidance on the operation of sections 188-10, 188-15, 188-20 and in particular 188-25.

    In the draft ruling capital assets are described as 'the business entity, structure or organisation set up or established for the earning of profits'. Capital assets will include tangible assets such as your factory or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles. Intangible capital assets will include your goodwill and business name. An asset which is acquired for resale in the course of carrying on an enterprise, is not a capital asset for the purposes of paragraph 188-25(a).

    GSTR 2001/D1 also provides guidance on the meaning of other terms used in section 188-25 such as 'solely as a consequence' and 'substantially and permanently' as used in section 188-25(b). A supply would be made solely as a consequence of substantially and permanently reducing the size or scale of an enterprise where for example, an Australia wide company with equal operations in each state completely closed its operations in one state.

    11.3 What does a non-resident who is registered for GST need to show as the income/turnover figure on the BAS?

    There was a suggestion that this would only be the turnover/income with a connection with Australia (that is, only Australian-sourced income).

    Only Australian-sourced income is relevant.

      Last modified: 22 May 2014QC 28063