GST for commercial rental
Question from Lee updated on 1st August 2016:
I am looking at a building that I would propose to have as a mixture of commercial and residential rental.
How would the income be assessed for GST? Would the commercial be GST and the residential No GST? And then - what about the outgoings re rates and repairs, etc in terms of GST claims?
Our expert Mark Withers responded:
Section 5(15) of the GST Act says that where a supply includes a dwelling this is a separate supply. This essentially means the commercial portion can be subject to GST as a taxable supply and potentially compulsory zero rating, but that the supply of the dwelling is an exempt supply.
When acquiring a property like this it is therefore wise to negotiate the split between the two supplies with the vendor and ensure the tax invoice issued reflects this split. This then will form the basis for apportionment of costs on the property. And, yes, you would need to apportion all between taxable and exempt and only seek to recover GST to the extent that the cost related to the taxable commercial use.
Be careful also to ensure that the standard warranty in the agreement has the vendor confirm that the supply of the dwelling is not a supply to which GST applies.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.
Search the Ask an Expert archive
Browse all questions in the Ask An Expert Archive »