Disposing of an Asset

Disposing of an asset usually refers to the sale of an asset. When you dispose of an asset you need to create an asset transaction to record the details of the disposal.

There a number of rules governing the disposal of assets which must be closely observed. Select the transaction type which most readily identifies the method in which you disposed of your assets.

DISPOSING OF ASSETS TOPICS

• To voluntarily dispose of an asset
• To involuntarily dispose of an asset
• To dispose of a pooled asset

To voluntarily dispose of an asset

When you sell an asset voluntarily, you ca n record details of the sale using the Voluntary Disposal of Asset transaction.

1 Go to the Transactions command centre and click Asset Transactions. The Asset Transaction
window appears.

 
2 Click the search icon in the Asset ID field to select the asset you want.

3 Enter the disposal date in the Date field.

4 Select Voluntary Disposal of Asset from the Type drop-down list. The book and tax fields for this transaction type are displayed. See the following table for a description of the fields. Some of the fields may not be displayed for certain types of businesses, assets or time periods. 

 
Written Down Value - The depreciated value of the asset for book purposes. It represents the difference between the acquisition cost of the asset and the depreciation calculated up to the date of the asset's sale.

Sale Amount - The amount received for the disposed asset. This will always be the tax exclusive value. 
Gain/Loss - The difference between the Written Down Value of the asset and its sale amount for book purposes. 
Adjustable / Reduced Value - The Adjustable Value is equal to the acquisition cost of the asset less the car limit, if applicable, less deduction amounts calculated to date. The Reduced Value also takes into account the private use percentage applied to the asset. 
Undeducted Cost /Actual WDV - The Undeducted Cost is equal to the acquisition cost of the asset less the car limit, if applicable, less deduction amounts calculated to date. The Actual WDV also takes into account the private use percentage applied to the asset.
Adjusted Sale Amount - The Sale Amount adjusted for the asset's car limit, if any. The formula applied is (car limit / cost) x sale amount. If there is a car limit, it is equal to the sale amount. 
Gain/Loss - This is equal to the Adjusted Sale Amount less the adjustable value/undeducted cost.
Additional Gain - This is only present when the asset has been sold for more than its original cost in an involuntary disposal. It represents the difference between the Sale Amount and the Acquisition Cost of the asset. 

Cost Base Indexed to 30/9/1999 - The indexed cost base is automatically calculated, but you can edit this amount as required. You may want to consult your accountant before you do so.
Index Adjusted Additional Gain - This is calculated by deducting the acquisition cost of the asset from the
Cost Base Indexed to 30/9/99 field. 
Create Balancing Charge - Create a balancing charge if you want to offset the assessable gain of the asset to another. That way, the gain you made on the sale of the asset will be deducted from the cost of another asset and reduce its value accordingly. For information about balancing charges see 'Applying balancing charges'

This Year - This field shows the balancing charge that will be offset against assets in the current financial year. This field defaults to 0.00 when the Create Balancing Charge checkbox is marked. If you want to apply the balancing charge this year, click the arrow to display the Balancing Charge window and enter the details in this window. 
Next Year - This field shows the balancing charge that will be offset against assets in the next financial year. When you mark the Create Balancing Charge checkbox, the balancing charge amount is automatically applied to this field.
Assessable Gain after Balancing Charge - This field defaults to 0.00. This is the assessable gain that still applies after allocating the balancing charge in the current year or next year. 
Private Use Adjustment - The reduction in the sale price due to the private use percentage that applies to the asset.
Assessable Gain / Capital Gain - The profit (or loss) on the sale of the asset, which is taxable (or deductible). If there is a private use percentage applied to the asset, a capital gain may also be calculated. 

5 Enter any additional information to help you identify the specific purpose of the transaction in the Note field.

6 Enter the amount received in the Sale Amount field. If the transaction date is after 30 June 2000 and the sale amount is a figure that includes GST, mark the Inclusive checkbox. The Adjusted Sale Amount field is automatically adjusted with an exclusive value. 

7 Decide what you want to do if the Cost Base Index is displayed. The cost base index only applies if:

• you were a large business (Non-SBE).
  
• you acquired the asset before 21 September 1999,
• the sale of the asset occurred on or after 21 September 1999, and
• the sale amount of the asset is greater than its acquisition cost. For example, you purchased a forklift for $25,000 in January 1997, and sold it for $27,000 in December 2000.

The following example illustrates how the Cost Base Index works. A taxpayer purchases an asset in December 1997 for $10,000. The asset is sold in the 2000 income year for $12,000. The assets undeducted cost at the time of the sale is $4,000 and its indexed cost base up until 30 September 1999 was $11,000. The difference between the acquisition cost and Cost Base Index value is $1,000 ($11,000 - $10,000). This value is used to reduced the Additional Gain which is equal to $2,000 or the asset sale amount minus the asset acquisition cost ($12,000 - $10,000). The
Additional Gain is reduced to $1000.

• To accept – do not change the figures in the Cost Base Indexed to 30/9/1999.

The value of the Cost Base Index field is calculated on a recommended formula and is calculated automatically.

• To edit – change the figures in the Cost Base Indexed to 30/9/1999 as appropriate.

If you want to change this value based on your own calculations, you may do so and proceed with the transaction. However, remember that the value in this field is used to reduce the Additional Gain to a value not below zero. You should consult your accountant if you require further advice.

8 Mark the Create Balancing Charge checkbox if it is displayed and you want to perform a balancing charge offset. For information about balancing charges see 'Applying balancing charges'

9 Observe that the Assessable Gain (loss) is automatically calculated. This value is shown in the Depreciation Schedule.

10 Click Journals if yo u want to preview the journal entries that will be posted to this asset. The Transaction Journal window appears.

11 Click OK to dispose of the asset. 

To involuntarily dispose of an asset

Involuntary disposals give you the advantage of offsetting a balancing charge to another asset instead of taking the profit into assessable income. However it is restricted to a number of conditions that must occur before it can be used.

Where a profit is made on the sale of a depreciable item normally this profit would be included in the assessable income of the seller. As an alternative, there is an option of reducing the cost of a replacement asset, thereby spreading the profit over a number of years. This is provided that the asset is used entirely for business purposes. Consult your accountant if you are not sure in what situations to use an involuntary disposal.

1 Go to the Transactions command centre and click Asset Transactions. The Asset Transaction
window appears. 

2 Click the search icon  in the Asset ID to select the asset you want. 

3 Enter the disposal date in the Date field.

4 Select Involuntary Disposal of Asset from the Type drop-down list. The book and tax fields for this transaction type are displayed. See the table below for a description of the fields. 

 
Written Down Value - The depreciated value of the asset for book purposes. It represents the difference between the acquisition cost of the asset and the depreciation calculated up to the date of the asset's sale.
Sale Amount - The amount received for the disposal of the asset. This will always be the tax exclusive value.

Gain/Loss - The difference between the Written Down Value of the asset and its Sale Amount for book purposes.
Adjustable / Reduced Value - The Adjustable Value is equal to the acquisition cost of the asset less the car limit, if applicable, less deduction amounts calculated to date. The Reduced Value also takes into account the private use percentage applied to the asset. 
Adjusted Sale Amount - This is the Sale amount of the asset adjusted for the car limit, if any. The formula applied is (car limit / cost) x sale amount. If there is no car limit, it is equal to the sale amount.
Gain/Loss This is equal to the Adjusted Sale Amount less the adjustable value/undeducted cost. 
Additional Gain - This is only present when the asset has been sold for more than its cost in an involuntary disposal. It represents the difference between the Sale Amount and the Acquisition Cost of the asset.
Cost Base Indexed to 3/9/1999 - The indexed cost base is calculated automatically, but you can edit this amount as required. You may want to consult your accountant before you do so. 
Index Adjusted Additional Gain - This is calculated by deducting the acquisition cost of the asset from the Cost Base Indexed to 30/9/99 field.
Create Balancing Charge - Create a balancing charge if you want to offset the assessable gain of the asset to another. That way, the gain you made on the sale of the asset will be deducted from the cost of another asset and reduce its value accordingly. For information about balancing charges see 'Applying balancing charges'
This Year - This field shows the balancing charge that will be offset against assets in the current financial year. This field defaults to 0.00 when the Create Balancing Charge checkbox is marked. If you want to apply the balancing charge this year, click the arrow to display the Balancing Charge window and enter the details in this window.
Next Year - This field shows the balancing charge that will be offset against assets in the next financial year. When you mark the Create Balancing Charge checkbox, the balancing charge amount is automatically applied to this field. 
Assessable Gain after Balancing Charge - This field defaults to 0.00. This is the assessable gain that still applies after allocating the balancing charge in the current year or next year.
Private Use Adjustment - The reduction in the sale price due to the private use percentage that applies to the asset.

Assessable Gain / Capital Gain - The profit on the sale of the asset, which is taxable. If there is a private use percentage applied to the asset, a capital gain may also be calculated. 


5 Enter any additional information to help you identify the specific purpose of the transaction in the Note field.

6 Enter the amount received in the Sale Amount field. If the transaction date is after 30 June 2000, and the sale amount is a figure that includes GST, mark the Inclusive checkbox. The Adjusted Sale Amount field is automatically adjusted with an exclusive value.

7 Decide what you want to do if the Cost Base Index is displayed. The cost base index only applies if

• you acquired the asset before 21 September 1999,
• the sale of the asset occurred on or after 21 September 1999; and
• the sale amount of the asset is greater than its acquisition cost. For example, you purchased a van for $40,000 in August 1997, and sold it for $45,000 in March 2000.

The following example illustrates how the Cost Base Index works. A taxpayer purchases an asset in December 1997 for $10,000. The asset is sold in the 2000 income year for $12,000. The assets undeducted cost at the time of the sale is $4000 and its indexed cost base up until 30 September 1999 was $11,000. The difference between the Acquisition Cost and the Cost Base Index value is $1000 ($11,000 -$10,000). This value is used to reduce the Additional Gain which is equal to $2000 or the asset sale amount minus the asset acquisition cost ($12,000 - $10,000). The Additional Gain is reduced to $1000.

• To accept – do not change the figures in the Cost Base Indexed to 30/9/1999.

The value of the Cost Base Index field is calculated on a recommended formula and is calculated automatically.

• To edit – change the figures in the Cost Base Indexed to 30/9/1999 as appropriate.

If you wish to change this value based on your own calculations, you may do so and proceed with the transaction. However, remember that the value in this field is used to reduce the Additional Gain to a value not below zero. You may consult your accountant if you require further advice.

8 Mark the Create Balancing Charge checkbox if it is displayed and you want to perform a balancing charge offset operation. For information about balancing charges see 'Applying balancing charges'

9 Click Journals if you want to preview the journal entries posted to this asset. The Transaction Journal window appears.

10 Click OK to dispose of the asset. 

To dispose of a pooled asset

When you sell a pooled asset, you can record details of the sale using the Disposal of Pooled Asset option. For tax purposes, the proceeds from the sale of a pooled asset is offset against the balance of the pool to which it belongs. If the amount offset against the pool is greater than the pool balance, the surplus amount is treated as assessable income.

1 Go to the Transactions command centre and click Asset Transactions. The Asset Transactions window appears.

2 Click the search icon in the Asset ID to select the asset you want. 

3 Enter the disposal date in the Date field.

4 Select Disposal of Pooled Asset from the Transaction Type drop-down list. The Disposal of Pooled Asset window will display the name of the pool to which the asset has been allocated, for example, 'Disposal of Low Value Pooled Asset'. The Book and Tax fields for this transaction type are displayed. See the following table for a description of the fields. 

 
Written Down Value - The depreciated value of the asset for book purposes. It represents the difference between the acquisition cost of the asset and the depreciation calculated up to the date of the asset's sale.
Sale Amount - The amount received for the disposed asset. This will always be the tax exclusive value. 
Gain/Loss - The difference between the Written Down Value of the asset and its Sale Amount for book purposes.
Balance of pool - The closing balance of the pool before the asset's sale.

Sale Amount - The amount received for the disposed asset. This will always be the tax exclusive value.
Adjusted Sale Amount - The Sale Amount adjusted for the cost limit, if any. The formula applied is (Car limit / Cost) x Sale Amount. 
Private Use Adjustment - The reduction in the Sale Amount due to the private use percentage that applies to the asset.
Closing Balance of Pool - The closing balance of the pool after the asset's sale. 
Assessable Gain - The difference between the Sale Amount and the Balance of Pool, when the Sale Amount is greater.
Capital Gain - If a private use percentage applies, a capital gain or loss may result. 

5 Enter the amount received in the Sale Amount field. If the transaction date is after 30 June 2000, check the tax code that has been selected for the sale. If the Tax Inclusive checkbox is marked, the sale amount you enter includes tax.

6 Enter any additional information to help you identify the specific purpose of the transaction in the
Note field.

7 Click Journals if you want to preview the journal entries posted to this asset. The Transaction Journal window appears.

8 Click OK to dispose of the asset.