When should you consider cancelling your GST registration?

Just as not being registered for GST (or required to be registered) can be an effective defence against an accusation that you have made a taxable income, legitimately cancelling your registration before the income is made can prevent the income from being taxable.

The cancellation process involves applying for the cancellation with the ATO. You are required to have done one of two things before you apply to cancel your GST registration:

  1. Ceased trading or now trading under the GST turnover threshold.
  2. Sold the business to another party.

If you leave the GST system, you are required to make an increasing adjustment in your final return.

If you apply for cancellation more than twelve months after becoming registered and the ATO is satisfied that you are not required to be registered, the ATO must cancel your registration.

Note that you are not required to have ceased operations. However, the ATO must be satisfied that your annual turnover is below the current and projected registration thresholds. Hence, you can cancel even if you are continuing to carry on an enterprise – as long as your turnover does not require you to be registered.

If you have ceased operations, the ATO can cancel your registration upon becoming satisfied that you are not carrying on an enterprise and that registration is not likely to be required for at least twelve months.

The ATO may also cancel your registration if you have been registered for less than twelve months and they are satisfied that you are not required to be registered.

This is important because there will be times when your best outcome is to purchase or sell property as a non-taxable source of revenue. One scenario would be if your current and projected GST turnover is below the threshold and you wish to sell a capital asset without paying GST.

In making this decision you will need to consider whether your current and projected GST turnover are below the threshold and the size of any increasing adjustment that may be required to make upon cancellation.

When the ATO cancels a GST registration, it will notify you of the date of effect of the cancellation and alert you to the possibility of an increasing adjustment.

Careful consideration should be given to your GST registration and whether cancelling that registration will be to your benefit.

If you need some help with it, do not hesitate to contact us.

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