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GST on sharing of expenses between main & sub tenant based on % of space occupied

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Hi,

 

We are a sub-tenant & are sharing some expenses (like electricity, internet, council rate & water etc) with the main tenant of the premises based on % of space occupied. We have the following scenario, would like to check whether GST applicable to us.

 

1. Our share council rate & water which is GST free say $500, can they bill GST on top of that & become $550 ?

 

2. For Electricity other expenses which is subject to GST, our share is $110 (inclusive of GST), they bill us $121 ($110+$11), is it correct to pay GST on top of GST?

 

Appreciate comment and feedback as soon as possible.

 

 

 

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Hi @MCL,

 

This is a bit of a curly question, so I'll try my best to explain, but please let me know if there's anything you need clarification on.

 

When there is a commercial premises being leased, this generally means that the landlord is making a taxable supply. Any services or facilities supplied with the premises are considered to be part of that taxable supply, and as such, the landlord is usually required to remit GST based on any money received in consideration for the commercial premises.

 

As an example, if you paid $3,000 in rent and $2,000 in outgoings (rates, water, etc.) the landlord would be required to remit GST to the ATO on a total of $5,000 received in consideration of the taxable supply.

 

Your liability for GST on outgoings as a tenant will largely depend on the lease agreement that is in place, but if you have agreed to pay a percentage of all costs then it's likely that GST would be applicable on those costs.

 

This is usually the case even if the landlord was not liable for GST on the expense, as in the case of local council rates or water charges. Payment of these amounts does not constitute a taxable supply made to the landlord, but they form part of the taxable supply being made to the tenant. So in your first example, GST would be payable by you as a tenant.

 

With respect to your second example, if the GST was already included on the amount that the landlord was liable for, then they do not charge GST on top of that amount again. The purpose of the GST charge to you as a tenant is to recoup only the GST that the landlord is liable for.

 

If you'd like any more information, you can have a look at GSTD 2000/10. It might also be worth your time to review the conditions of your lease agreement with your landlord or the main tenant, to make sure that everything is being worked out correctly.

 

I hope this helps,

 

Rachael B.

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Hi @MCL,

 

This is a bit of a curly question, so I'll try my best to explain, but please let me know if there's anything you need clarification on.

 

When there is a commercial premises being leased, this generally means that the landlord is making a taxable supply. Any services or facilities supplied with the premises are considered to be part of that taxable supply, and as such, the landlord is usually required to remit GST based on any money received in consideration for the commercial premises.

 

As an example, if you paid $3,000 in rent and $2,000 in outgoings (rates, water, etc.) the landlord would be required to remit GST to the ATO on a total of $5,000 received in consideration of the taxable supply.

 

Your liability for GST on outgoings as a tenant will largely depend on the lease agreement that is in place, but if you have agreed to pay a percentage of all costs then it's likely that GST would be applicable on those costs.

 

This is usually the case even if the landlord was not liable for GST on the expense, as in the case of local council rates or water charges. Payment of these amounts does not constitute a taxable supply made to the landlord, but they form part of the taxable supply being made to the tenant. So in your first example, GST would be payable by you as a tenant.

 

With respect to your second example, if the GST was already included on the amount that the landlord was liable for, then they do not charge GST on top of that amount again. The purpose of the GST charge to you as a tenant is to recoup only the GST that the landlord is liable for.

 

If you'd like any more information, you can have a look at GSTD 2000/10. It might also be worth your time to review the conditions of your lease agreement with your landlord or the main tenant, to make sure that everything is being worked out correctly.

 

I hope this helps,

 

Rachael B.

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