GST on commercial rents

Question from Frances updated on 18th February 2019:

If a commercial property rent is less than $60,000 does the owner of this commercial property have the choice not to be registered for GST? Someone says all commercial rent need to declare GST. But I'm not sure where the reference is for that.




Our expert Matthew Gilligan responded:

It is not accurate to say that all commercial rent is subject to GST. You are correct in that if the gross (i.e. before expenses) commercial rental does not exceed $60,000 then you have the option of being registered for GST or not. If you elect not to be registered for GST, then you do not charge GST on the rent. That said, there a couple of important points to note in relation to this.

Whether or not you breach the $60,000 threshold is determined by looking at all of the activities that you carry on that potentially could be subject to GST (in the same entity). For example, if you personally owned the commercial property (gross rent, say, $50,000 per annum) and you also had a sideline business selling health supplements (gross sales $20,000 per annum) then you would need to be GST registered and charging GST in relation to both activities because the accumulated turnover exceeds the $60,000 threshold.

Secondly, if you are buying a commercial property and you elect not to be registered for GST because the turnover is less than $60,000, you may need to pay GST on the purchase price and not have the ability to reclaim it. In the long term that could prove to be advantageous to you as you would not need to return GST on your sale, but you need to factor in the additional funding at the outset.

Matthew heads GRA's specialist property and asset planning division. He helps clients create optimal tax structures and build wealth through property. He has an extensive buy-to-hold property portfolio, is currently involved in over a dozen developments, and is author of two books - Property 101 and Tax Structures 101.

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