GST on commercial property

[scientist]

If I buy, say a shop or office, for say 1.1M, would that figure include 100k of GST? Do all commercial property transactions have a GST component? or is there some way people can structure it so that there's no GST?

I also run a business where our net GST bill (after deductions) is over 30k a year - is there some way I can take advantage of this? e.g. if I buy a shop for say 1.1M under the company name, can I use that 100k GST paid as GST credits to last me the next 3+ years? but the downside is now the entire commercial property is in the company name and is at risk in case of unexpected crap. Does public liability insurance (10M) generally pay first, or until your last cent of company equity is gone?

Basically, what's the smartest way to buy, say, a shopfront for investment these days, given I run a business with an ongoing GST bill? I can either buy it under the company, or my personal name, or my SMSF, or set up something like a trust, or new company etc.

 

[DaveM]

If the seller and purchaser are GST registered and the property sold with a lease in place (going concern) then there is generally no GST payable

If you are buying it for your use, then trust or smsf may work.. generally you dont want a trading entity owning property/plant for asset protection/liability limitation

 

[scientist]

If the seller and purchaser are GST registered and the property sold with a lease in place (going concern) then there is generally no GST payable

Where can I read more about this?

So is it like, if I buy a shop that already has a tenant business in it, there's no GST payable? that's awesome.

Also do I need to slice 1/11th off each rent cheque I get and pay as GST once I get the shop? Is there a way to structure that away too?

 

[Scott No Mates]

Yes, provided the lessor (is different entity to the tenant & registered for GST), the lessor will provide a tax invoice with GST. The tenant will pay the invoice & gst but claim it back in their BAS as gst paid.

If you are purchasing vacant, you will need to pay the gst but claim it back in your next BAS (if you are gst registered - ie get registered or you will be paying more than necessary).

No, you will always need to pay the GST if you are gst registered but that is for you and your accountant to discuss in detail.

 

[scientist]

What if I use a new company that's not registered for GST and use that to buy the property? will I still need to pay 1.1 or will I pay 1M?

Yes, provided the lessor (is different entity to the tenant & registered for GST), the lessor will provide a tax invoice with GST. The tenant will pay the invoice & gst but claim it back in their BAS as gst paid.

Sorry I don't quite understand this part. Why would the tenant pay? I'm buying the property with a existing tenant in it.

 

[Terry_w]

Where can I read more about this?

So is it like, if I buy a shop that already has a tenant business in it, there's no GST payable? that's awesome.

Why awesome? You may be able to claim the GST back anyway.

 

[Scott No Mates]

What if I use a new company that's not registered for GST and use that to buy the property? will I still need to pay 1.1 or will I pay 1M?

if you're not registered then you'll pay $1100000 if you're registered then you pay $1,000,000 +$100,000 gst

Sorry I don't quite understand this part. Why would the tenant pay? I'm buying the property with a existing tenant in it.

the tenants will pay gst on the renr if the lease provides, they won't pay the $100k, that's yours.

 

[scientist]

if you're not registered then you'll pay $1100000 if you're registered then you pay $1,000,000 +$100,000 gst




the tenants will pay gst on the renr if the lease provides, they won't pay the $100k, that's yours.

Oh so once I purchase it, I'll be on 100k GST credit, then the tenant pays me rent + GST and slowly chips away at my 100k credit, until one day I have to pass that onto the govt, is that how it all works?

 

[Scott No Mates]

No. Why would you leave $100k in the ato's hands? You submit your BAS (monthly/quarterly/annually) and get it back or you buy as a going concern providing that you are gst registered. if not you LOSE IT.

The tenant might kick $8k per year in gst which would mean that it could take 12 years to collect $100k.

If you aren't registered for gst you can't invoice the tenant for gst invoicing must be in accordance with the lease.

 

[Foxy Moron]

Hey Scientist
I can hear a penny starting to drop with these questions. But there are two issues in one here. First the GST element - with all the issues about going concern v taxable supply, and secondly what is the best structure in which to acquire this property. It sounds like you're fairly interested in doing something.
Do your personal research, ask away on the forum, but at the end of the day you really need to get professional one on one advice tailored to your circumstances, and you cant get this from the forum alone. If you get these decisions 98% right it could end in tears. So do yourself a favour and go see Terry W in Sydney (or someone equally as savvy if you can find one) to get this sorted before you put pen to paper on a contract. Knowledge is Power.

 

[Paul@PFI]

When buying commercial property its important to get tax advice as well as legal advice.

- Does contract quote a GST inclusive price ?
- Has vendor nominated going concern ?
- What are the proposed changes to going concern that I should be concerned about.
- Can I ask for going concern ?
- What is going concern ??
- If I need to pay GST what do I need to do to ensure I can claim the 9.09% paid that is GST ?
- How does the GST threshold affect me ?

A simple matter such as a defective tax invoice can mean GST credits cannot be claimed.

Many lenders wont lend the GST element on settlement. The ATO usually will audit the BAS and it can take a month to get your refund. Cashflows must be considered.

 

[Paul@PFI]

No. Why would you leave $100k in the ato's hands? You submit your BAS (monthly/quarterly/annually) and get it back or you buy as a going concern providing that you are gst registered. if not you LOSE IT.

The tenant might kick $8k per year in gst which would mean that it could take 12 years to collect $100k.

If you aren't registered for gst you can't invoice the tenant for gst invoicing must be in accordance with the lease.

Reality is that most tenants in commercial property are also GST registered and they expect their landlord to give them a tax invoice that allows that to claim 1/11th of the rent paid as a credit against their GST bill.

 

[coastymike]

it's awesome because you will pay lower stamp duty. stamp duty is generally based on the GST inclusive price.