GST on Business Car Disposal with Change in % Business Use

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(Dynamo)Dynamo

12 June 2021

Hi All

Let say X bought a car in 2016 (FY) with 30% business use. X claimed 30% of GST on the car in 2016. The car was put in the small busines pool and fully written off in 2016 as it was under threshold for simplified depreciation for small business.

X continued to use the car for business with business use percentage of 30% in 2017, 30% in 2018 and 10% in 2019. X didn't do GST adjustment for the change of his business use % in 2019.

X sold the car in 2020. As the average business use % for 4 years above was 25%, X reduced the closing pool balance for the diposal of the car by 25% of its termination value net of GST.

My question is about how much GST does X need to pay back on the disposal of the car? Should X pay back average % business use over 4 years of 25% or should X pay back his initial business use of 30% considering there's no other change to the car?

I appreciation your advice and especially if you could give a case or an example with similar facts, that would be great.

Thank you in advance

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ATO Certified Response

BlakeATO

(Community Support)Community Support

ATO Certified Response

14 June 2021

Hi @kasshiko123

When the taxable use of an asset changes, a GST adjustment usually must be done to amend (or adjust) the original GST credit claimed. A GST adjustment may not need to be done at all, though, depending on the value of the car, as its adjustment periods may have passed.

The calculation will be: The full GST of the car Ãƒâ€” [original intended/estimates business (for you: 30%) use minus actual business use percentage (for you: 25%)]. The final result is the adjustment amount. The taxable sale value GST will be charged on is 25% of the vehicle, the rest is personal use.

You can read about this all under Change to taxable sale on our website.