Security Deposit on Commercial Properties

When you own a commercial property in QLD and ask the tenant to pay a security deposit (like a bond) for 3 month's rent how is it treated? By that I mean, do you need to lodge it with a government organisation like residential investment properties where tenants pay a bond, or do you need to set up a trust bank account for it or can you simply bank it in your own bank account.

I am aware that in some states there are rules for this but I can't find anything for QLD.

Thanks.
 
It can be treated in several ways:

Bank Guarantee - no special requirement, just keep the original safe.

Retail - needs to be lodged with retail bond board (or equivalent in Qld)

Commercial - no requirement, you can hold it in any bank account, you may split the interest with the tenant, you may give all of the interest to the tenant (hence no income tax reporting requirement on the interest).
 
Thanks for the replies.

I also found out that it depends what's stated in the lease. That is, if in the lease it states it will be put into a trust account then that is what you must do. Same with paying interest to the tenant.
 
It would be extremely rare that the money would be placed in a trust account. Generally it is placed in a term deposit or other interest bearing account.
 
It can be treated in several ways:

Retail - needs to be lodged with retail bond board (or equivalent in Qld)

Commercial - no requirement, you can hold it in any bank account, you may split the interest with the tenant, you may give all of the interest to the tenant (hence no income tax reporting requirement on the interest).

Retail treated the same as commercial- no need to lodge with any special authority.
 
Yeah- I've got some clients who have the 3 or 6 month bond paid in cash to them. If the tenant sells the business and assigns the lease the bond isn't released until the new tenant coughs up a replacement bond. Technically the bond will never be repaid unless the tenancy is vacated or the building sold (it will then be an adjustment to the purchase price).

Think of it as an interest free loan!
 
yes you can either get a bank guarantee, which is a piece of paper from the bank basically like a blank cheque the landlord can cash at any time - make sure it has no conditions preventing you from cashing it (should be unconditional guarantee).

or

security deposit - where the tenant pays you the $ direct and you 'look after it'. You might lodge it as a term deposit, who knows. Depends what you have in the lease. Generally speaking you would probably do this and the tenant gets the interest at the end.

Just make sure you get whatever the 3 or 6 months rent is PLUS GST on top of that, while it is not a taxable supply at present when/if you ever use it would trigger GST that is why you need the amount put up as security to be inclusive of GST.
 
Just make sure you get whatever the 3 or 6 months rent is PLUS GST on top of that, while it is not a taxable supply at present when/if you ever use it would trigger GST that is why you need the amount put up as security to be inclusive of GST.

If it is a net lease, you should also make an allowance for the outgoings for the period of the bond as well.
 
Someone posted the following on another forum:

When we negotiated the bond we agreed to let the tenants pay it over 12 installments to help with their cash flow. They have paid 6 out of 12 installments so far and am about to use the money to purchase another 10 ounces of gold bullion. Their lease is for another four and a half years so we have plenty of time.

So they are using funds from the bond (that their tenant has paid) to fund their personal investments. Out of curiosity are there any laws that govern the use of the bond? As outlined in this thread there is no authority that over sees the bonds, but surely there must be laws which govern what the landlord does with it?
 
So they are using funds from the bond (that their tenant has paid) to fund their personal investments. Out of curiosity are there any laws that govern the use of the bond? As outlined in this thread there is no authority that over sees the bonds, but surely there must be laws which govern what the landlord does with it?

No in commercial (for a retail lease) you just need to put it in an interest bearing account, and record the interest. Most times the landlord keeps the interest. Although of course most landlords probably use the funds for their own purposes/investments - how would the tenant know?

If the tenant is a non-retail one, then the landlord can do whatever they want with the security deposit money. Even better.
 
commercial rental bond

Queensland commercial property rental bond does NOT require that it be lodged with the rental tenancies board. can be cash and is often held by agent or the owner. i always prefer that the owner hold it. stops the agent trying /holding any leverage over you.
generally the tenant lodges a bank guarantee - which is effectively a bank cheque draw-able against the bank. Don't lose it!
 
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