Sold or disposed of your business asset? Or gave away your business asset for free? Account for GST even when you did not receive any money for it
From time-to-time businesses may sell, transfer or dispose of assets used in their business such as office equipment, office furniture, machinery. Sometimes, it could be because the asset is no longer in working condition or the business has no more use for it. Old business assets could also be traded for new ones to keep on top of technology.
As a GST registered business owner, you must account for GST when you
- sell or trade-in your business asset; or
- transfer or dispose of the business asset for free, under certain circumstances.
Learn about the correct GST treatment in different scenarios when you sell, trade-in, transfer or dispose your business assets.
Also watch this video to learn more about sale and disposal of business assets!
Correct GST treatment when you sell or trade-in your business asset
When you sell your business asset for a consideration (whether monetary or non-monetary), you are making a taxable supply of goods. The sale is therefore subject to GST.
It is irrelevant -
- that the sale of the asset is not part of your normal business activities;
- who you sell the asset to; or
- if you have incurred GST or claimed input tax when you purchased the asset.
Instead of selling your business asset, you may decide to trade it for a new asset. For GST purposes, these are 2 separate transactions -
- Transaction 1 – Your sale of the old business asset to the supplier at the trade-in price
- Transaction 2 – The supplier’s sale of the new business asset to you at the price before trade-in
When you sell your old business asset to the supplier for the trade-in price, you are making a taxable supply of goods. The sale is therefore subject to GST. This is even though you do not receive any money from the supplier for your old business asset.
If the supplier is a GST-registered person, you should issue a tax invoice to it for the trade-in of your old business asset.
Correct GST treatment when you give away business assets for free
When you give away your business assets for free (i.e. no consideration is received), you must account for GST based on the open market value* of the asset. The exceptions are -
a. Gifts of goods made in the course of your business where the cost of the good is not more than $200 (excluding GST); or
b. you did not claim input tax on the purchase of the asset.
This is as you are deemed to be making a supply of the business asset according to the GST Act.
GST is however not accountable if the business asset is obsolete and has no market value.
* Open market value 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.