GST consequences and treatment
Scenario:
Given the following facts, my question is, what is the GST consequence when the motor vehicle is transferred out of the business?
- The vehicle cost $180,000 and GST credits were claimed on the car limit. GST on the contract was $13,374
- Running expenses, depreciation (up to the limit) and so on have been claimed at 80% business use in the partnership tax return
- The vehicle has been owned for 15 months
- The written-down value of the vehicle is $155,000 on the date business use ceased
- The market value of the vehicle is $140,000 on the date business use creased
Explanation:
Under GST Act s 129-70, the GST consequences of this change in use would be an increasing adjustment, the formula is:
- Full ITC (input tax credit) * (former application- actual application)
- Full ITC refers to the full amount of the input tax credits that could have been claimed (1/11th of the luxury car limit); Former application is 80%, actual application is 0%.
- Note, since full input tax credits were not claimed initially, the adjustment in s130-5 does not apply;
- If the vehicle is transferred out of the business, this would amount to a taxable supply that would attract GST of 1/11th of the selling price.