Commercial Property

Oct 10, 2022, 16:47 PM
Title : Commercial Property

Should all commercial property owners register for GST?

Goods and Services Tax (GST) will apply to the sale of all commercial property by a registered entity, such as commercial property owners with annual turnover (including rental income) greater than $75,000.

Commercial property owners who generate turnover (including rental income) less than $75,000 may choose to register for GST. A property owner must group all of his or her enterprise together to determine whether to register for GST.

If an unregistered commercial property owner also does not have an Australian Business Number (ABN) to include on rental invoices issued to a tenant, then there is a risk the tenant will be required to submit part of the rental payments directly to the Australian Taxation Office (ATO).

In this situation the unregistered commercial property owner may consider the merits of just applying for an ABN. For further information on the implications of GST and PAYG, owners should contact their financial advisers.

Will GST apply to strata levies?

A body corporate with an annual turnover of $75,000 or more must register for GST. A body corporate with an annual turnover of less than $75,000 may choose to register.

A registered body corporate will be required to include GST in the amounts levied on proprietors. The body corporate will be entitled to input tax credits for the GST included in costs such as electricity, management, cleaning, repair and maintenance services. It will also be required to lodge a Business Activity Statement for each tax period.

Will GST apply to the sale price of commercial property?

GST will apply to the sale of all commercial property by a registered entity, such as commercial property owners with annual turnover (including rental income) greater than $75,000. Entities that generate turnover (including rental income) less than $75,000 may choose to register for GST. 

Will GST apply to commercial property rentals?

GST will apply to leases of commercial property entered into from 1 July 2000, where the registered owner is, or is required to be, registered for GST. 

Will GST apply to the sale price of farm land?

The supply of farmland will be GST free if the supplier has carried on a farming business on the land for at least five years before the sale. In addition, the purchaser of the farmland must intend to operate a farming business on the land.

If the farmland is used for a different purpose, an increasing adjustment will be required to be made.

A large farm may be subdivided into a number of smaller farms and sold off. These supplies would be GST free provided each of the farms can operate separately.

Will GST apply to the sale of a going concern?

The supply of a going concern (including a business) is GST-free in the following circumstances:

  • The purchaser must be registered or required to be registered for GST.
  • The supplier must carry on the business until it is sold.
  • All of the things required for the continued operation of the business must be supplied.
  • Both parties must agree in writing that the supply is a going concern.

Can the buyer of a commercial property claim a credit for the GST included in the sale price?

If the buyer is registered for GST, then the buyer may be able to obtain an 'input tax credit'. The claim will depend on whether the seller has applied the margin scheme to calculating the GST liability.

If the seller has applied the Margin Scheme, the buyer will not be able to claim GST.

Prior to making an offer to buy commercial property the buyers of commercial property should determine how the GST has been calculated.

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