GST on rent

Discussion in 'Commercial Property' started by Befuddled, 12th Jun, 2015.

  1. Befuddled

    Befuddled Member

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    I recently purchased a commercial property under personal name.

    The property has long term tenants who continue to rent the place. There are no lease contracts in place and we'd like to keep it that way.

    I am not registered for G.S.T and am not required to at this point (Total rent is not expected to exceed the 75k threshold in the near future)

    The previous owner was registered for G.S.T and therefore the tenants have always included G.S.T in the rent.

    One of the tenants has asked me to include G.S.T in the rent receipts as well as an ABN. Obviously, I am unable to satisfy this request because I cannot charge G.S.T, not to mention don't have an ABN! I understand that he wants this to claim G.S.T credit which is fair enough. I'm happy to reduce the rent slightly to make up for the lost G.S.T credits.

    My questions are:
    1. Would this be acceptable from an accounting point of view?
    2. Do I need to provide him with anything else?
    3. In the future, when rent takings exceed the threshold, what do I need to do besides register for GST? What are the implications?

    Thanks.
     
  2. jrc

    jrc Member

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    Did you have to pay Gst on the purchase?
     
  3. Scott No Mates

    Scott No Mates ...and people wonder why?

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    If you aren't registered for gst, then you obviously cannot issue a tax invoice nor charge gst.

    Conversely, you cannot claim gst on any of your expenses eg maintenance.

    If you are registered for GST, then you would be able to charge it in accordance with the lease eg: $60k + 6K gst. As for expenses, management at say $2,500 + $250 gst, Water rates $1,500, Council rates $2,000 Annual fire safety statement/certification $600 + $60 gst Insurance $2,000 + $90 gst etc

    So effectively you are collecting $6k gst but also paying (able to claim back) $400 gst and remitting $5600 to the ATO. If you aren't registered then (unless there is a gross-up clause in your lease) you will only collect $60k but pay out the extra $400.

    If you have a grossup clause, then you'll collect $66k, pay the extra $400 and tax on the additional $6k. If you aren't registered for gst but have a grossup clause, the tenant can't claim the gst (as you haven't charged it).
     
  4. Befuddled

    Befuddled Member

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    No. Solicitor said it was fine. Seemed to conflict with ATO page on going concerns though. Does it make a difference if it was a sale of property only and not a business?
     
  5. Terry_w

    Terry_w Member

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    If you are not registered for GST then your rent cannot include GST and the tenants cannot claim back any GST.
     
  6. Scott No Mates

    Scott No Mates ...and people wonder why?

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    It makes no difference. Going concern exemption only applies if both purchaser/seller are registered for gst.
     
  7. Befuddled

    Befuddled Member

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    Ok just to clarify because it's still not entirely clear to me. I won't get slapped with a 10% GST bill for the purchase right?
     
  8. Befuddled

    Befuddled Member

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    Thanks Terry (yes we went ahead with it :))
     
  9. Scott No Mates

    Scott No Mates ...and people wonder why?

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    Depends upon what was on the front page of the contract of sale
     
  10. DaveM

    DaveM KFC Buyers Agent

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    You would issue them an invoice for rent with no GST.

    Eg if the previous owner was charging $4000 + GST per month total $4400, you would send them an invoice for $4000 no GST applicable.

    As for the 10% GST, as SNM says it depends on the front page. If you were not GST registered then the going concern rules may not apply. Often people will register the purchasing entity for GST, use the going concern GST waiver, then de-register after next BAS if they do not have an ongoing benefit of being GST registered.
     
  11. Befuddled

    Befuddled Member

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    Thanks everyone for clearing it up