09 March 2018
Sale - Commercial property – Adjusting the GST on rent and outgoings
Hi Mentor,
For commercial property sold on a going concern basis, how would adjustments of outgoings be calculated in respect of the GST component of the rental and the outgoings?
Thank you.
Thank you for the question.
Rent adjustment is calculated on a GST exclusive basis. Rent will only be adjustable if paid in advance to the landlord/vendor. In that case the landlord has issued a tax invoice inclusive of GST, the tenant is entitled to a tax credit and the landlord/vendor is liable to remit that GST to the Australian Taxation Office with his next business activity statement. This removes GST from the adjustment process and rent is adjusted without taking into account any GST paid by the tenant to the landlord/vendor.
The payment of rates by the vendor prior to settlement or by the purchaser on behalf of the vendor after settlement is regarded by the tax office as part of the vendor’s supply to the purchaser and therefore GST is payable on the rate adjustments, where they add to the price.
See the following taxation rulings for more information: GSTD 2006/3 and GSTR 2004/9.
Regards
Mentor
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