Q: What happens with GST when a vehicle is taken out of a business?
The vehicle cost $180,000, and $13,374 in GST was claimed on the purchase. Running costs and depreciation were claimed at 80% for business use on tax returns. The vehicle has been owned for 15 months and is now valued at $155,000 with a market value of $140,000.
The GST consequence is an increasing adjustment under GST Act s 129-70:
Formula: Full ITC * (former use - current use)
Full ITC means the total input tax credits possible (1/11th of the luxury car limit). Former use is 80%, current use is 0%.
Note: Since full input tax credits weren't initially claimed, the adjustment in s 130-5 doesn't apply.
If the vehicle leaves the business, it's considered a taxable sale, attracting GST at 1/11th of the selling price.
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers. You can also book an appointment through our live calendar.