Do I have to pay GST back when I close my business?

Yes. Under the 'Deemed Sale' rule, you must pay GST on the open market value of any business assets (like vans, tools, or stock) that you keep for personal use after cancelling.

What is the $1,000 exception?

If the total GST you would owe on your retained assets and stock is less than $1,000, you don't have to make an adjustment. You can keep the assets without paying the GST back.

Can I just stop filing GST returns if I close?

No. You must formally cancel your registration via myIR. If you just stop filing, the IRD will issue 'Default Assessments' and charge late penalties.

Verified for 2026 Tax Year

Cancelling GST Registration

Closing down or dropping below the threshold? Beware the "Deemed Sale" rule that forces you to pay GST back to the IRD.

The 10-Second Rule

When you cancel GST, you are "deemed" to have sold all your business assets (vans, tools, laptops) to yourself at their current market value. You must include the GST on this "sale" in your final return.

The Exit Calculation

1. Identify all assets you claimed GST on

2. Determine their "Open Market Value" (What they'd sell for today)

3. PAY 15% GST ON THE TOTAL VALUE IN BOX 5

When Can You Cancel?

Cancelling isn't always optional. The IRD requires you to deregister if you stop your taxable activity, but you can also choose to leave if your turnover drops.

Closing Down

You have permanently stopped trading or selling services. (Required)

Selling the Business

You sell the entity as a "Going Concern" to another registered person. (Required)

Low Turnover

Your sales drop below $60,000 and you don't expect them to rise again. (Optional)

Real-World Examples

Scenario A: The Retiring Tradesman

Dave retires and keeps his $30,000 work van. He claimed the GST when he bought it. Now, he must pay 15% of the van's $30,000 current value ($3,913 GST) back to the IRD in his final return.

Scenario B: The $1,000 Exception

A consultant closes her business. Her only assets are an old laptop and some furniture worth $5,000 total. The GST on this is $652. Since the total GST is **under $1,000**, she doesn't have to pay anything back.

The Cancellation Checklist

✓ Log in to myIR and select "Cease Registration".
✓ Choose the exact date your business activity stopped.
✓ File your final return, including adjustments for retained assets.
✓ Pay any outstanding GST balance to avoid late penalties.

Critical Audit Risk

Don't just "walk away" and stop filing. If you don't formally cancel, the IRD will continue to expect returns. They will eventually issue **Default Assessments** (estimating your income) and apply aggressive late filing penalties and interest.

Frequently Asked Questions

What happens to my unsold stock?

You must pay GST on its cost price or market value (whichever is lower). This is included in your final return alongside your assets.

Can I cancel and then re-register next month?

If you re-register within a short period, the IRD may view the cancellation as a sham to avoid paying GST on assets. This can lead to severe tax avoidance penalties.

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