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  • Calculating adjustments

    You need to work out an adjustment for each business asset for which the adjustment periods haven't expired.

    Work out the adjustment using the following formula and include the resulting amount on your final activity statement as GST on sales (label 1A):

    (applicable value × actual application) ÷ 11

    Applicable value is the lesser of:

    • the market value of the asset (including GST) immediately before your cancellation date
    • the purchase price or cost of importing the asset (including GST).

    Actual application is the percentage of the asset's use that was for business purposes, calculated from the date of purchase or importation until the date you cancelled your GST registration.

    • If you've always used the asset solely for business purposes, your actual application percentage is 100%.
    • If you've used the asset partly for private purposes, you'll need to calculate the percentage of business use on a reasonable basis.

    If you use the calculation worksheet method to account for GST, include the following amount at box G7 on your worksheet:

    applicable value × actual application

    Example

    Frank, a sole trader who operates a clothing store, is registered for GST and reports quarterly. Frank cancels his GST registration, with effect on 30 September 2013.

    Frank decides to keep a car, a computer and a filing cabinet that he had been using for his business. He needs to consider whether an adjustment is required for these assets as they will be held immediately before cancellation takes effect. The exceptions for deceased estates don't apply.

    The car, computer and filing cabinet were always used 100% in his business. Frank bought the:

    • car in August 2011 for $27,500 and claimed a GST credit of $2,500 for it in the September 2011 tax period
    • computer in October 2010 for $3,300 and claimed a GST credit of $300 for it in the December 2010 tax period
    • filing cabinet in February 2013 for $660 and claimed a GST credit of $60 for it in the March 2013 tax period.

    Frank establishes that the current market value of each asset is as follows:

    • car $11,000
    • computer $220
    • filing cabinet $440.

    His first step is to work out whether the adjustment periods for the assets have expired. None of Frank's purchases relate to business finance, so he uses table A to work out the number of adjustment periods for each asset.

    • The car has five adjustment periods. The first adjustment period is the June 2013 tax period as this is the first June tax period that is at least 12 months from the end of the tax period in which the purchase of the car was attributed. The fifth and last adjustment period will be the June 2017 tax period. As the adjustment periods will not expire before Frank's cancellation takes effect, he must make an increasing adjustment for the car:
    • The computer has two adjustment periods. The first adjustment period is the June 2012 tax period as this is the first June tax period that is at least 12 months from the end of the tax period in which the purchase of the computer was attributed. The last adjustment period is the June 2013 tax period. The adjustment periods for the computer expire before Frank's cancellation takes effect, so he doesn't need to make an adjustment for the computer.
    • The filing cabinet has two adjustment periods. The first adjustment period is the June 2014 tax period as this is the first June tax period that is at least 12 months from the end of the tax period in which the purchase of the filing cabinet was attributed. The last adjustment period is the June 2015 tax period. As the adjustment periods will not expire before Frank's cancellation takes effect, he must make an increasing adjustment for the filing cabinet.
    Frank calculates the adjustments for the car and filing cabinet as follows:

    Asset

    Applicable value
    (lesser of purchase price and market value)

    x Actual application for business use

    Subtotal

    ÷ 11

    Car

    $11,000

    100%

    $11,000

    $1000

    Filing cabinet

    $440

    100%

    $440

    $40

    Adjustment amount to include at 1A on activity statement

    $1040

     

    End of example

    See also:

      Last modified: 31 May 2017QC 40230