Sale of a depreciating asset used wholly for a taxable purpose
If the depreciating asset is used wholly for a taxable purpose, the full balancing adjustment amount is applied. No capital gain or capital loss arises.
John operates a small printing business and decides to sell an old photocopier for $2,750. Assuming the sale is a taxable supply, the termination value is reduced by the $250 GST payable. This means that the reduced termination value of the photocopier is $2,500 ($2,750 less $250).
If at the time of sale the adjustable value of the photocopier is $2,000, John must include $500 in his assessable income ($2,500 less $2,000).
If at the time of sale the adjustable value of the photocopier is $2,700, John would claim a deduction of $200 ($2,700 less $2,500).
End of example