Rent & GST
No. Commercial rent does not always have to include GST. The GST treatment is dependent upon the GST situation of the "landlord". That said, the tenant may influence that decision "if" there is one.
A landlord is required to be registered for GST if their annual taxable "supplies" (ie rent) exceeds $75,000. If annual rent projected forward is to be $80,000 the landlord needs to register for GST from day 1 and not only once they exceed the $75K threshold. This turnover threshold is a strange beast and the "enterprise" that the landlord operates should be considered and not just an individual lease. Some examples:
1. Landlord personally owns a strip of 3 shops. Each has annual rent of $50K. Threshold is exceeded. The strip of shops likely to be an enterprise even if there are three titles.
2. Landlord owns three distinct and seperate shops in 3 locations. Each has rent of $50K. Threshold is exceeded. Distinct titles is not of concern for GST. The landlord has a single business "enterprise".
3. Landlord owns one shop personally. Also has two trusts each with one shop. Each has annual rent $50K. It is possible GST registration is not required as there are three enterprises.
4. Looking back at 3....Lets say the last trust acquired its property using "Going Concern" basis to avoid paying GST on the property purchased. That trust was obliged to be reg'd for GST. So GST must be charged on rent for that trust. It cannot deregister after purchase.
5. Then there is a possible complication of a mixed supply. For example a flat above a shop. No GST is charged even if the business is registsred as it is residential rent. And no GST on outgoings (eg repairs) can be claimed on that unit either.
I have seen well meaning clients seek advice of friends who suggest that three ABN's for three properties avoid the threshold problem. No. Fail. This is an area where advice on the acquisition, its structure etc that includes GST would be well advised at the time when the contract is being considered. May save you a fortune.
Then there is the issue of voluntary GST registration. This is perhaps the greater issue...The owner of commercial premises will have a tenant who "expects" the price for rent is GST inclusive so they can claim 1/11th for the input tax credit. GST registered businesses dont look at GST as a cost as it is an outlay they recover on a BAS. They see the cost as 10/11th of the rent. If they cant claim any GST they would argue for a rent reduction of....1/11th. They won't pay above market. Its like buying a second hand car - It has a market price regardless of whether the seller is registered (car yard) or not (private seller).
Paul
http://pricefinancial.com.au/taxation