GST and ABN registration

Where the deceased was conducting a business as a sole proprietor at the date of death, the Legal Personal Representative (LPR) will need to assess what is to occur to the business going forward; that is do they continue to trade the business within the estate to either sell or pass to the beneficiary or does the business cease to exist? Under either scenario, actions will be required in relation to both GST and ABN registrations and a tax election considered in relation to trading stock.

Current at 1 November 2021

GST and ABN registration

Where the deceased was conducting a business as a sole proprietor at the date of death, the Legal Personal Representative (LPR) will need to assess what is to occur to the business going forward; that is do they continue to trade the business within the estate to either sell or pass to the beneficiary or does the business cease to exist? Under either scenario, actions will be required in relation to both GST and ABN registrations and a tax election considered in relation to trading stock.

Current at 1 November 2021

Where an LPR decides to continue to trade in a business, it is necessary that they apply for a separate ABN and if necessary, GST registration within the estate. It would also be necessary to consider both PAYG and superannuation registrations if the business employed staff.

These registrations are required as essentially the estate is a separate legal entity. Interestingly, the GST Act under section 27-40 deems that the tax period of an individual who dies is taken to have ceased at the end of the day prior to their actual date of death.

Both section 138-17 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and section 70- 105(3) of ITAA 1997 provides respective rollover relief from deemed taxation events relating to both GST and stock on hand when an LPR continues to conduct the business within the Estate.

It is important to note that an election should also be considered within the date of death tax return for this stock to be transferred at cost, and not market value. Whilst easy to overlook, this will influence where the profit within this stock on hand is to be taxed and could accordingly result in very significant differences in the amount of income tax to be paid.

Where however the LPR elects not to continue to operate the business and the deceased was registered for GST, S.138-5 of the GST Act requires that an increasing adjustment is included within the final Business Activity Statement in relation to assets where the deceased previously had an entitlement to input tax credits. In essence, this means that 1/11th of the market value of any business assets that are subject to GST would need to be declared and remitted in the final BAS prepared by the executor. This is despite the fact that the assets may not have been physically sold.

Similarly, sub section 70-105(2) triggers a deemed disposal of trading stock to be included in the deceased’s final date of death income tax return. This is measured at market value.

It is worth also noting, that the ownership and leasing of commercial premises is considered as conducting a business, and that where annual rental is in excess of $75,000 pa, there is an obligation to register and remit GST on commercial rental.

 

 

Feel free to contact our team should you want to discuss this topic further and potentially have clients who may be in this situation.

 

 

This publication is not intended to be and should not be used as a substitute for taking taxation advice in any specific situation. The information in this publication may be subject to change as taxation, superannuation and related laws and practices alter frequently and without warning.  Neither BNR Partners Pty Ltd, our employees or agents are responsible for any errors or omissions or any actions taken or not taken on the basis of this publication.