Does a GST-registered tradie charge GST when selling used tools?

The general rule

The ATO says a capital asset is something kept to earn revenue, not for sale in the ordinary course of business, and lists office equipment and machinery among its examples. If you are registered or required to be registered for GST and you sell, trade in or otherwise transfer such an asset in Australia, you charge GST and account for it on your activity statement.

The ATO says this applies even if the asset was bought before 1 July 2000 or sold to someone who is not in business. You report the payment you receive at G1 (total sales) for the relevant tax period.

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Worked example

This is our fictional example. A GST-registered plumber sells a used pipe press to a private buyer for $1,100, GST included. The sale is fully taxable. GST is one eleventh of the GST-inclusive price.

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What does not remove the GST

The ATO's list of disposals where you do not charge GST covers assets that are not business assets, a business sold as a GST-free going concern, certain residential premises and certain farm land. A private buyer, an old purchase date or the tool being second-hand are not on it, and the ATO says a private sale does not change the rule.

If the tool was used partly for private purposes, the ATO says you may be entitled to a decreasing adjustment. It does not reduce the GST payable on the sale, but it can reduce the net GST for the period. The formula is capped and has exceptions, so ask your accountant rather than estimating it.

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Records to keep

This list is our recommendation, not an ATO form. Keep the purchase invoice and date, the price paid, the GST credit you claimed, your business-use percentage, the sale date, the buyer's details, the GST-inclusive sale price and a note of the activity statement period where you reported it.

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Close out the asset record

Match the sale to the original purchase and asset record, then give the disposal details to your accountant. The GST calculation does not by itself settle the asset's other tax treatment.

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Common questions

Is there GST on the sale of business assets?

Generally yes if you are registered or required to be registered for GST and the asset is a business capital asset sold in Australia. The ATO lists exceptions such as non-business assets and a business sold as a GST-free going concern.[1]

Do you charge GST on sale of assets?

If you are GST-registered and the sale is a taxable sale of a business asset, you charge GST and report the payment at G1 on your activity statement. If you are not registered and not required to be, the ATO says sale proceeds from a capital asset are left out of your projected GST turnover.[1]