Closing a Business? Don’t Forget the GST Registration

If the current prolonged lockdowns and economic conditions have prompted your clients to sell or close their business, it’s important they are aware of the need to cancel the related GST registration within a certain period, unless the business is in a specific industry or performs a specific role.

Typically, unless the business is taxi driving/ride-sourcing, you represent an incapacitate entity (ie an individual who is bankrupt or a company in liquidation and that entity is registered for GST), or you are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST, you must cancel your GST registration within 21 days if you sell or close your business.

TIP: If you decide to change your business structure, such as changing from a partnership structure to a company structure, you must also cancel your GST registration within 21 days, unless the old entity carries on another business.

Remember, cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date that you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after the date you chose.

Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll be required to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. For taxpayers operating on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period will need to be recorded.

For taxpayers who are cancelling their GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. However, if a company was not restructured, sold or closed, but simply no longer carries on a business, then there is a choice for the business owner to keep the ABN registration. Nevertheless, the GST registration must be cancelled in those circumstances.

Overseas businesses that have been hit by lockdowns in various states may have seen their taxable supplies drop below the GST turnover threshold (ie $75,000) – in those instances, cancellation of GST registration or associated ABNs need to be carefully considered, as the business may still have Australian income tax obligations. This also applies if overseas businesses’ taxable supplies fall below the GST threshold due to not being connected to the Australian Indirect Tax Zone.

Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.