We are receiving a monetary contribution as a lease incentive from our Landlord to assist in fitting out our business premises. The landlord is to retain ownership of the fitout assets at termination of the lease. They will therefore treat the fitout on their balance sheet as an asset and will be entitled to depreciation.
As the Lessee, we are merely acting as a conduit for the payments between landlord and building contractors. We will be invoiced by the contractors and will make payment (effectively on behalf of the landlord).
For arguments-sake, assume the fitout contribution is $100k and total build works will total $150k.
I am confused on the treatment of GST throughout this process. My current understanding is as follows:
- We will invoice the landlord $110k ($100k + $10k to cover GST component) as Fitout funds held in trust. This will be BAS Excluded on our invoice to the Landlord. The landlord pays these funds to us.
- When we receive $100k of invoices from builders, we will treat these costs as BAS excluded and offset them against the fitout funds held in trust.
- For the remaining $50k of fitout costs, we will recognise these assets as our own and claim GST on capital.
- We will then provide the landlord all funds and they will claim the GST outright.
Am I correct?
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875 views
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