GST on Commercial Property in Australia: How It Actually Works
General information only, not financial, tax or legal advice. GST law is detailed, the outcome depends on the facts of your transaction and your registration position, and the rules and thresholds mentioned here change over time. Speak to a licensed adviser about your own situation.
TL;DR
GST on commercial property applies because commercial premises are a business input, while existing residential premises are input taxed. If the vendor is registered and selling in the course of an enterprise, the sale is usually a taxable supply, and the GST is one eleventh of the GST-inclusive price. A registered buyer can generally claim that back as an input tax credit, but only after settlement, through a business activity statement. The sale can instead be GST-free as the supply of a going concern if the property is tenanted and both parties meet the conditions in writing. Rent and recovered outgoings also carry GST.
Why GST on commercial property works differently from residential
Most residential investors never meet GST on a purchase, so the first commercial deal can feel like the rules changed. They did not. The two asset types simply sit in different GST categories.
Existing residential premises and residential rent are input taxed: no GST is charged, and no credits can be claimed on holding costs. Commercial leasing is a business activity, so rent is a taxable supply, the sale usually is too, and a registered owner can claim credits on the GST in their costs.
GST on the sale price: Existing residential: None, input taxed; Commercial: Yes, if the vendor is registered
GST on rent: Existing residential: None, input taxed; Commercial: Yes, if the landlord is registered
Credits on purchase costs: Existing residential: Not claimable; Commercial: Claimable if registered
Credits on outgoings and repairs: Existing residential: Not claimable; Commercial: Claimable if registered
Is GST payable on commercial property?
Usually yes, though it turns on the vendor rather than the building. A sale is a taxable supply where the vendor is registered or required to be registered for GST and is selling in the course of their enterprise. From there, the outcome is one of three:
A fully taxable sale. GST applies to the full price, and the contract must say whether the price includes it.
A GST-free supply of a going concern. The property transfers with its leasing enterprise intact.
A sale under the margin scheme. GST applies to the margin only, and the buyer gets no credit.
An unregistered vendor not required to register is the uncommon fourth case: no GST, no credit.
The one eleventh concept
GST is a flat-rate tax, currently 10 per cent, applied to the GST-exclusive value of a supply. Confirm the rate and your own position with the ATO or your accountant.
Once GST is added it is no longer a tenth of the total, it is one eleventh of it. Add $110,000 of GST to a price of $1.1 million and the total is $1.21 million, of which $110,000 is exactly one eleventh. Working back from a GST-inclusive figure, divide by eleven.
This matters in contracts: "$1,210,000 inclusive of GST" and "$1,210,000 plus GST" sit more than $100,000 apart.
Registering for GST and claiming the credit on your purchase
Registration
Registration attaches to the entity carrying on the enterprise, whether a company, a trust or an individual. There is a turnover threshold above which registration is compulsory, and commercial rent counts towards it, so one decent lease can be enough. Below the threshold you can register voluntarily, which commercial buyers often do so they can claim credits. Check the current threshold with the ATO.
Claiming the input tax credit
If you are registered and acquiring the property to lease it commercially, the GST on the purchase is generally a creditable acquisition. You claim it in the activity statement for that period, and you need a valid tax invoice from the vendor.
The same applies to GST inside your transaction and holding costs: agent fees, legal fees, building reports, management and repairs. Council rates, land tax and most interest carry none.
Mixed use needs care: if part of the building is residential, some GST may not be claimable, and a later change of use can trigger an adjustment.
The GST-free supply of a going concern
This is the concession that takes GST out of the deal, and the one most used on tenanted commercial property. It is not automatic. All of the following must hold.
The sale is for consideration.
The buyer is registered, or required to be registered, at the time of the supply.
Both parties have agreed in writing, before the supply, that the sale is of a going concern.
The vendor supplies everything necessary to continue the enterprise: the premises plus the lease and associated rights.
The vendor carries on the enterprise until the day of supply.
Miss one and the concession fails. The usual failure points are a buyer not registered by settlement, a lease surrendered or expiring before completion, and a vacant property with no leasing enterprise to transfer. Vacancy should never be assumed to qualify.
Going concern treatment is a cash-flow advantage, not a tax saving: there is no GST to fund and none to claim. A later use that is not fully creditable, such as residential conversion, can trigger an adjustment.
The margin scheme and when it is relevant
Under the margin scheme, GST is one eleventh of the margin between the sale price and the vendor's acquisition cost or an approved valuation, rather than of the whole price. It exists mainly for property that entered the system before GST, and shows up more often in land and development than in tenanted premises. Eligibility depends on how the vendor acquired the asset, and it is not available where they bought it as a fully taxable supply with a full credit. Both parties must agree in writing, generally by settlement.
The catch is that where the margin scheme applies, the buyer cannot claim an input tax credit. For a registered buyer that usually makes it less attractive than a fully taxable sale or a going concern.
GST on rent and on outgoings recovered from tenants
If you are registered, the rent on commercial premises is a taxable supply and one eleventh of what you receive belongs to the ATO. Commercial leases are normally drafted as rent plus GST for that reason.
Recovered outgoings work the same way, which surprises new owners. Where a lease requires the tenant to reimburse council rates, land tax, insurance or body corporate levies, that recovery generally forms part of the consideration for the lease and carries GST, even though some of the underlying charges carried none. You are not on-charging a bill, you are being paid under a lease.
The offset is credits on the outgoings that did include GST, provided the lease is drafted properly. A lease silent on GST is where landlords absorb it.
The settlement cash-flow trap
On a fully taxable purchase you hand over the GST at settlement, in cash, on top of the price and other acquisition costs. Lenders generally size a loan on the value excluding GST, so the GST is not usually part of what you borrow. Duty in most states is calculated on the GST-inclusive consideration, which lifts that cost too, so check with the relevant state revenue office.
The credit only returns once you lodge the activity statement covering the acquisition, which on a quarterly cycle can be months later. Buyers manage this by structuring as a going concern where it genuinely qualifies, registering well before settlement, moving to monthly reporting so the refund arrives sooner, or funding the GST with short-term finance.
What to get right in the contract of sale
Most expensive GST mistakes are drafting mistakes. Before you sign, confirm:
Whether the price is GST-inclusive or GST-exclusive, stated unambiguously.
The vendor's registration status and whether they sell in the course of an enterprise.
For going concern treatment, the written agreement, a warranty that the buyer will be registered by settlement, and a fallback if the concession fails.
For the margin scheme, the written agreement and your acceptance that no credit is available.
The vendor's obligation to provide a valid tax invoice at or before settlement.
How GST interacts with settlement adjustments for rent and outgoings.
Note too that the GST withholding regime, which makes buyers remit GST straight to the ATO, applies to new residential premises and potential residential land, not commercial property.
This is one area where an accountant is not optional
GST turns on your registration, your structure, the vendor's history with the asset, the state of the lease at settlement and the exact contract wording, and the gap between the right and wrong answer is often six figures. Have an accountant who works in commercial property read the GST clauses before you make an offer.
Where to go from here
GST is one of several mechanics that behave differently in commercial property, alongside lease structures, outgoings and finance. The Fortify Your Wealth video series at https://investorcode.com.au/fortify-your-wealth-series walks through how commercial assets are assessed. Cal Doggett has spent more than 20 years in Australian commercial property and has transacted over $550M, and the series reflects how he approaches the asset class.
For a more structured path, the Commercial Property Mastery course at https://investorcode.com.au/online-course covers acquisition, due diligence and lease fundamentals in sequence. Work through it alongside your own accountant and solicitor.
Frequently asked questions
Is GST payable on commercial property in Australia?
Usually yes. Where the vendor is registered for GST and selling in the course of their enterprise, the sale of commercial premises is a taxable supply. The exceptions are a GST-free going concern, a margin scheme sale, and a vendor who is neither registered nor required to be.
Can I claim the GST back on a commercial property purchase?
Generally yes, if you are registered for GST and buying for a creditable purpose such as commercial leasing. You claim it as an input tax credit in the activity statement covering the acquisition, and you need a valid tax invoice. The refund comes after settlement.
What does going concern mean for GST on property?
It means the vendor transfers an operating enterprise, typically tenanted premises with the lease intact, so the sale is GST-free. Both parties must agree in writing before the supply, the buyer must be registered, and the vendor must keep the enterprise running until settlement.
Do I pay GST on commercial rent and on outgoings?
If the landlord is registered, commercial rent is a taxable supply and GST applies. Outgoings recovered from a tenant under the lease generally carry GST too, even where the underlying charge, such as council rates, did not. Credits apply to outgoings that did include GST.
Is stamp duty calculated on the GST-inclusive price?
In most Australian states and territories, duty is calculated on the total consideration, which includes any GST payable, so GST treatment affects your duty cost. Rules and rates vary and change, so confirm the position for your state with the relevant revenue office.
Is GST payable when buying commercial property in an SMSF?
It can be. An SMSF carrying on a commercial leasing enterprise can register for GST and claim credits, subject to the usual rules and to restrictions on some fund expenses. Going concern treatment is also available where the conditions are met.