Sub-let GST confusion

Our Experts Answer:

This situation is covered by section 14(1)(c)(b) of the GST act. The section specifies that a supply is an exempt supply when " The supply of property by way of lease that is to be used for the principal purpose of accommodation in a dwelling by any person other than a registered person in the furtherance of a taxable activity".

This means that even though you are not using the property residentially yourself, the fact that someone else is, then requires the landlord to apportion the lease cost relative to the taxable and exempt supply portions. IE: The landlord should not be charging you GST on the residential portion of the lease you are paying and you in turn should be charging no GST on the sublet cost.

The rent the tenant pays you would not be declared in your GST return. There may also be further consequences for the landlord as the new concurrent use of asset rules may then require him to make an adjustment for the fact that some of the property is not supplied for use in a GST taxable activity.