Closing up shop: winding up your ABN and GST registration when you retire from self-employment

Plenty of Australians retire from self-employment rather than from a salaried job — tradespeople, consultants, contractors, farmers and small business operators who have spent their working lives under their own Australian Business Number (ABN). For them, stopping work is more than no longer taking on jobs: it means formally winding up the business registrations. That covers cancelling the ABN, cancelling GST registration, lodging a final Business Activity Statement (BAS), and dealing with the tax consequences of any business assets kept for personal use — the work ute, the tools, the gear. These steps are easy to overlook in the rush of retiring, but leaving a dormant ABN or GST registration active keeps the obligations ticking (more BAS lodgements, ATO follow-ups), and there is a real and frequently missed goods and services tax (GST) trap on assets you keep. Done in the right order, a clean wind-up avoids both. This sits alongside the bigger decisions — a business sale, the small business CGT concessions, and super contributions from sale proceeds — covered elsewhere.

When should you cancel the ABN?

The ABN should be cancelled once you have genuinely ceased carrying on an enterprise — not while you are still winding down, issuing final invoices or disposing of business assets. Cancellation is done online through the Australian Business Register or ATO online services, or via a tax agent, and it deactivates the number (the ABN is kept on record and can be reactivated if you later resume an enterprise). The discipline is timing: don't cancel prematurely. The cancellation should mark genuine cessation, after the last invoices are issued and paid and the business assets have been dealt with.

How does cancelling GST registration work?

GST deregistration is time-bound. If you permanently close or sell your business you must cancel your GST registration within 21 days of ceasing to carry it on. GST registration is compulsory once annual GST turnover reaches $75,000 and optional below that, so on ceasing business the registration comes off. You must then lodge a final BAS for the tax period that covers the cancellation's date of effect, finalising all your GST obligations — GST on final sales, credits on final purchases, the sale or dispersal of business assets, and any cancellation adjustments. Because GST registration is linked to the ABN, cancelling the ABN generally cancels the GST registration too, but that final BAS still has to be completed.

What is the GST adjustment trap on retained assets?

Here is the trap, and the refinement most people miss. If you cancel your GST registration and still hold business assets on which you previously claimed GST credits, you may have to repay some of those credits by making an "increasing adjustment" on your activity statement. The classic case is the work ute or van bought with GST credits claimed, then kept for personal driving once the tradie retires; tools, equipment and a work computer kept privately are the same. For a motor vehicle the amount is one-eleventh of the market value times the business-use percentage at cancellation. But — and this is the part the "you'll owe GST on your ute" warning usually leaves out — the adjustment only bites while the asset's GST "adjustment periods" are still running. Each asset has a set number of adjustment periods depending on its value, and once they expire there is no adjustment: as the ATO puts it, you usually wouldn't need to repay GST credits on a car held for more than five complete financial years. So a recently bought ute can trigger a real cost, while one you've driven for years generally won't. The point is to work this out before you cancel, not discover it afterward (and note that no adjustment applies where the cancellation relates to a deceased estate).

What happens with the final BAS and final tax return?

The final BAS closes out the GST, including any retained-asset adjustment. The last year's business income then goes in the final income tax return, along with balancing adjustments on depreciating assets — the difference between an asset's adjustable value and its termination value or market value when it is sold or retained — and the accounting for any trading stock on hand. Pay-as-you-go (PAYG) instalment obligations cease when the business income stops, so the final instalment should be varied down to avoid overpaying. Getting the balancing adjustments and trading stock right is what makes the final return accurate.

Does selling the business change the wind-up sequence?

Whether you sell or simply stop shapes the wind-up. Where the business is sold — goodwill, assets and client base transferred — there are CGT consequences, potentially accessing the small business CGT concessions, and GST consequences, since the sale of a going concern can be GST-free where the conditions are met. Where the business simply ceases, there is no goodwill sale, but the asset disposals and the GST and ABN wind-up still apply. The sequencing differs in one important way: don't cancel GST registration before a going-concern sale completes, or the GST-free treatment could be put at risk. The registration wind-up has to be coordinated with the sale or cessation, in the right order.

Should you keep or cancel your registrations for an encore career?

Not everyone fully stops. Many retiring self-employed people keep doing some consulting, contracting or part-time work, and for them cancelling and later reactivating the ABN is pointless churn — if a genuine enterprise continues, the ABN can stay active. Where the continuing work drops below the $75,000 GST turnover threshold, you can cancel the GST registration (it's optional below the threshold) while keeping the ABN, shedding the quarterly BAS but keeping a number to invoice with. And if the post-retirement activity is a genuine hobby rather than an enterprise, no ABN is needed at all. The decision turns on whether genuine enterprise continues: full cessation calls for cancelling both registrations; an ongoing enterprise calls for keeping the ABN (and GST if above the threshold); a drop below the threshold lets you keep the ABN but cancel GST. Either way, business records should be kept for the standard period (generally five years) after cessation, with CGT records for business assets kept longer.

Worked examples

These two cases show the wind-up in action. They are illustrative only and not personal advice.

Trevor, 66, a sole-trader electrician retiring after 35 years, is registered for GST. He isn't selling — there's no real goodwill, he's just stopping — but he wants to keep his work ute and tools for personal use, and he claimed GST credits on the ute when he bought it three years ago. On these facts the path is the simple sole-trader one, with the GST adjustment front and centre. The sensible sequence is to finish and invoice the final jobs and collect payment, account for GST on those sales, then work out the increasing adjustment on the ute and tools he's keeping. Because the ute is only three years old, its adjustment periods haven't expired, so an adjustment applies — roughly one-eleventh of the ute's market value times its business-use percentage. He then cancels GST within the 21 days and lodges the final BAS including that adjustment, cancels the ABN once he's genuinely stopped, and lodges the final income tax return with balancing adjustments on the ute and tools. On these facts the rational move is to flag that ute-and-tools cost before cancelling so it isn't a shock, and to vary the final PAYG instalment down. Had the ute instead been one he'd driven for more than five complete financial years, there would generally have been no adjustment at all — which is why the timing of the asset purchase matters.

Susan, 64, a self-employed marketing consultant, is "retiring" but plans to keep doing a little consulting for a couple of long-standing clients — perhaps $20,000 to $30,000 a year — and is currently registered for GST. On these facts she shouldn't fully cancel, because a genuine, if smaller, enterprise continues. Her expected income is well below the $75,000 GST turnover threshold, so GST registration is now optional for her. On these facts it is generally rational to cancel her GST registration — lodging a final BAS and checking for any retained-asset adjustment on equipment such as a computer she'd claimed credits on — while keeping her ABN active to invoice her ongoing clients. That sheds the quarterly BAS burden while leaving her able to invoice as a legitimate enterprise, and if the consulting later grows past the threshold she'd simply re-register for GST. This is the encore-career version of the keep-or-cancel call: match the registrations to the genuine ongoing enterprise rather than reflexively cancelling everything.

For self-employed Australians winding down toward retirement, the ABN and GST wind-up is a practical, frequently overlooked part of the transition. The work is to confirm genuine cessation before cancelling anything, sequence the steps (final invoices and asset disposals, then account for GST and adjustments, then cancel GST within 21 days and lodge the final BAS, then cancel the ABN, then the final income tax return), identify the retained-asset GST adjustment — while remembering it only applies inside the asset's adjustment-period window — handle the final return's balancing adjustments and cease PAYG instalments, coordinate with any business sale and the small business CGT concessions, make the keep-or-cancel call sensibly where an encore career is likely, and keep records for the required period. The retiring employee just stops being paid; the retiring sole trader has registrations to close, a final BAS to lodge, and a possible GST bill on a recently bought ute they're keeping. Getting the sequence right, and pricing that adjustment before it bites, makes for a clean exit from self-employment.

Sources

• ATO — Cancelling your GST registration
• ATO — Adjusting for assets retained after cancelling GST registration
• ATO — Motor vehicles held when your GST registration is cancelled