Business assets include old furniture, office equipment and non-residential property. Generally, you have to account for GST (i.e. output tax) when you:
When you sell your asset (including disposal or transfer of the asset to another party for a consideration), you are required to account for output tax based on the consideration (e.g. money) you receive.
Printing company A sells its old photocopying machine to printing company B. A has to charge B with GST for the machine, and account for the output tax based on the selling price to B.
When your asset still has market value and you dispose of, transfer or give away the asset for free, you are required to account for output tax based on the Open Market Value (OMV) of the asset. OMV of the asset refers to the price, excluding GST, that the asset could have fetched if it has been sold to an unrelated party at the time of disposal or transfer.
You are required to account for output tax based on the OMV of the asset applies unless:
If the asset is obsolete and has no market value, you need not account for output tax when you dispose of, transfer or give away the asset.
A clothes retailer gives clothes from her business stock to her friend for free. These clothes have a market value of $500.
In this case, he must account for output tax on $500 when she gives away the clothes if she had claimed input tax on her purchase of the business stocks.
However if she did not claim the input tax, she need not account for output tax when she gives away the clothes.
A carpenter gives away dented wood to a recycling centre for free. As the dented wood is obsolete and has no market value, the carpenter need not account for GST.
You must account for GST at the earliest of the following events:
You must account for GST on the date when you dispose of, transfer or gave away the assets.
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