Accounting for GST
When you dispose of property
If you are registered for GST and you dispose of a capital asset that is real property, you must account for GST unless the disposal is a GST-free or input taxed sale. For GST purposes, real property includes any of the following:
- an interest in land or a right over land – for example, easements
- a personal right to be granted such rights or interests – for example, options
- a licence to occupy land
- any other contractual right exercisable in relation to land – for example, a restrictive covenant.
If you make a taxable sale of real property, GST is one-eleventh of the sale price. For example, if you sell a block of land for $66,000, the GST is $6,000.
However, if you are entitled to use the margin scheme, GST is one-eleventh of the margin, rather than one-eleventh of the sale price.
Depending on when the property was purchased and who it was purchased from, the margin is generally the difference between the sale price and one of the following:
- the amount you paid for the property
- an approved valuation of the property at a given date.
Find out more
End of find out more
- GSTR 2000/21 External LinkGoods and services tax: the margin scheme for supplies of real property held prior to 1 July 2000
- GSTR 2006/7External Link Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000
- GSTR 2006/8External Link Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000
Capital assets held when 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:
Formula = 1/11 x (Market value of the asset x percentage of business use)
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%)
End of example