GST on commercial properties

Hi Coslett

Yes, you will have to pay GST on commercial property. There is an exemption if the property is being sold as part of a going concern (i.e. purchase of a business).

GST is normally not payable on residential property.

If you will be borrowing the money to pay for the GST (i.e. financing 100%) then you should consider the cost of the finance when assessing the property.

The RE agent should tell you if GST applies. For a more reliable answer, ask your conveyancer.

Cheers

Stu

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at http://www.prosolution.com.au

G’day coslett,

For commercial properties, there is generally no obligation on the agent or seller to give a GST inclusive price, unless they’re targetting “retail” customers. I believe that the ACCC has developed some guidelines on what is “retail” and what isn’t.

If you’re simply looking at a stock-standard commercial property, advertised in the commercial property sales section of the paper, then I doubt that the agent has to give you a GST inclusive price. The rationale for this is that commercial buyers are likely to get a GST input tax credit for GST on the commercial property, which they can offset again their future GST liability.

Stuart is right – if you buy the commercial property as a “going concern”, then it could be a GST-free supply.

However, it is important that you comply with ALL of the requirements in the GST Act (see section 38-352):

1. YOU the buyer must be registered for GST.
2. the contract must state that the supply is of a going concern
3. the seller supplies you with all things necessary for the continued operation of the business.

Even the ATO has had trouble getting to grips with what circumstances satisfy the statutory requirements (for the supply of a going concern). You can get more information by visiting the ATO website and getting hold of the latest Tax Ruling on sales of going concerns.

With respect to Stuart, I don’t think that a conveyancer is qualified to properly advise you on whether or not you can satisfy the going concern requirements. You’ll need to get professional tax advice from a tax accountant or lawyer (including what you need to get from the seller, and the GST clause that needs to go into the contract). It may cost you a thousand bucks or so, but compare that to the pain (at least in cashflow terms) you’re going to suffer when you find out that you have to fork out an extra whopping 10% of the purchase price to pay for GST.

Cheers
M

All the best coslett!

Oh and I forgot to mention that the primary liability to pay GST to the ATO is on the supplier (ie the seller). The buyer will generally pay GST by virtue of a contractual obligation – that is, the contract will say that the buyer has to reimburse the seller for the seller’s GST liability. In return (and upon receipt of a tax invoice), the buyer (if registered for GST) gets an input tax credit which can be used to offset against future GST liability (in some cases, I think even a refund may be possible!)

But check with an accountant before you take the plunge.

Cheers
M