• New Wave Accountants

Goods and Services Tax and Selling Your Business Property

Selling your business property is a big decision, but a misstep can cost you. Many owners forget to factor in GST, which is a big error. However, there are valuable opportunities for tax credits, so you should keep records of all related documents to satisfy the ATO.


What Is Goods and Services Tax?


GST is a tax charged on most things, except fresh fruit, vegetables, and some other items. The amount of GST you pay is based on the price you pay, which includes the price of the item plus any freight and insurance costs, plus any other charges.


The GST in Australia is ten per cent. This flat tax rate applies to all Australian businesses and individuals.


The ten per cent tax rate means larger businesses can pay less, as they have more opportunities to take advantage of tax deductions. Small businesses, however, may have more difficulty and find it hard to come up with the cash to pay the tax bill.


It is also a cash tax, so you have to pay it in full even if you don't have the funds. This makes it particularly difficult for smaller businesses.


Why Do You Need to Care About GST?


The costs are high. You need to withhold the GST and remit the money to the ATO. The GST has been growing in popularity, and the current rate is ten per cent. This is for most goods and services. If you are not providing a GST-free service, you will be required to collect the GST.


You also need to know the tax credits available when you buy something. For example, if you buy a business asset, you can claim it as a tax credit. This applies to all business purchases of GST-inclusive items.


Businesses claiming credit for a GST-inclusive purchase need to keep purchase invoices and other records to support the claim.


What Happens When You Sell Your Business Property?


Many owners forget that the GST is based on the price, not the amount received. So, if you are selling your business property and you have already received the payment, you will have to refund the value of the GST back to the buyer of the property.


This means you will have to pay the GST out of your own pocket before you can pay the rest of the agreed price to the buyer of your business property.


The tax credits you might get for the GST-inclusive purchase are also lost because you are entitled to receive the tax credits only when required to pay the GST.


Not only that, but you need to pay back the value of the GST to the buyer of your business property. And perhaps this is what you want to do. If you want to pay back the taxes, you will claim it as a tax deduction. This will reduce the tax you need to remit to the ATO.


This also means you should get a tax invoice for the GST amount you are paying back, as you will need to claim it as a tax deduction.


Conclusion


You should not assume that you are free from the GST when you sell your business property. You and the buyer need to factor in the GST in the price. You can't forget to pay the GST and ask the buyer to reimburse you later.


If you are selling your business property, you can let the buyer pay the GST or pay the GST to the buyer. You are eligible for a tax credit for the GST paid to the buyer, but this is only if you are required to pay the GST.


Unlike many Small Business Accountants on the Gold Coast, New Wave Accounting provides end-to-end accounting and bookkeeping services that help scale and grow businesses. We understand small businesses and have worked with over 600 businesses in several industries. This has allowed our Gold Coast Accountants to understand each industry and create tailored solutions for our clients. If you’re looking for a reliable accountant on the Gold Coast, we’ve got you covered. Get in touch with us today and let us know how we can help.



11 views0 comments

"We take a holistic approach toward each of our business clients. Our clients consistently experience more profit, improved cash flow, and less tax."

Sign up to receive our FREE DOWNLOAD 

"101 Strategies for Business Owners to Save Tax" 

3d cover .png