Sale and Disposal of Business Assets

Business assets include old furniture, office equipment and non-residential property. Generally, you have to account for GST (i.e. output tax) when you:

  • sell your business assets (including disposal of or transfer of asset to another party with consideration received); and
  • dispose of, transfer or give away your business assets for free and these assets still have market value, unless exceptions apply.

Selling Your Assets

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.

Disposing of Your Assets for Free

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.

Effective from 1 Oct 2012, this requirement to account for output tax based on the OMV of the asset applies unless:

  1. The cost of the asset is not more than $200; or
  2. No credit for input tax was allowed to you on the purchase or import of those assets.

If the asset is obsolete and has no market value, you need not account for output tax when you dispose of, transfer or give away the asset.  

You are required to account for output tax based on the OMV of free gifts of assets/goods unless:

  1. The cost of the gift is not more than $200 and the gift does not form a series of gifts*; or
  2. No input tax was allowed on the purchase of the gift.

*Series of gifts refers to a situation where 3 or more gifts (regardless of value) are given to the same person within a period of 3 months. In determining whether a gift constitutes a series of gifts, gifts purchased from non-GST registered persons must also be taken into account.

The following changes have been made for free gifts of assets/goods:

  1. The series of gifts condition has been removed. You no longer have to track the number of goods given to a person. You are only required to account for output tax if the cost of each good exceeds $200; and
  2. You are required to account for output tax only if input tax on those goods has been allowed to you. If you choose not to claim the GST incurred on those goods, you are not required to account for output tax when you subsequently give the goods away for free.

When GST on the supply of the goods has been suspended (e.g. goods imported under the Major Exporter Scheme), the GST suspended is treated as input tax allowed to you.

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.

When to Account for Output Tax

When Assets Are Sold

You must account for GST at the earliest of the following events:

  1. The date when you issue the invoice;
  2. The date when you receive the payment; or
  3. The date when you deliver or hand over the business assets. This tax point is applicable for the sale of non-residential properties only.

When Assets Are Disposed of for Free

You must account for GST on the date when you dispose of, transfer or gave away the assets.

RATE THIS PAGE

  • Strongly Disagree
  • Strongly Agree

Information is easy to understand.

Information is useful.

Information is easy to find.

 
Please email us if you would like us to respond to your enquiries.