Property

Rent

Rent is the regular payment made for the use of property, and residential rent is input-taxed with no GST, while commercial rent from a registered landlord is generally taxable.

Rent is the payment a tenant makes to a landlord for the right to use property, usually weekly, fortnightly or monthly. For GST, the treatment of rent depends on what is being rented and who is renting it out. Getting it wrong is easy, because rent for a home and rent for a shop can look similar, yet the GST position is quite different.

Rent for residential premises is input-taxed. The landlord does not add GST, and the tenant does not pay it. The landlord also cannot claim input tax credits for costs related to the rental, such as repairs, agent fees and insurance, to the extent that they relate to the residential rental. This applies whether the landlord is a person with one investment unit or a large business. For most small residential landlords it means GST is simply not part of the picture.

Rent for commercial property is taxable if the landlord is registered for GST. The landlord adds 10% to the rent and reports it on the BAS, and a registered tenant can claim the GST back as an input tax credit with a valid tax invoice. If the landlord is not registered, no GST is charged. A landlord with only a small amount of commercial rent may choose to register voluntarily if the credits on its costs outweigh the effect on its tenants.

Short stay accommodation is a special case. Renting rooms to guests for short stays, such as through holiday rental platforms, can be a supply of commercial residential premises, which is generally taxable, rather than residential rent. If the income reaches the registration threshold, registration for GST may be required. This is an area where owners are sometimes caught by surprise, because they assume that all rental of a home is input-taxed.

Rent is also relevant to income tax, which has its own rules. Rental income is generally assessable, and certain expenses such as interest, repairs and agent fees may be deductible. These matters are separate from GST, and the input-taxed status of residential rent does not affect them. Keeping separate records for the income tax and GST sides can help avoid confusion.

Other points include rent paid in advance and rent that is overdue. For GST on commercial rent, timing follows the landlord's accounting method, and for a cash basis taxpayer the GST is reported when the rent is received. Rent reviews and changes to the amount can lead to adjustments. A tenant paying rent to a registered landlord should keep each tax invoice, which can often be supplied as a monthly invoice.

This is general information only. Confirm the GST treatment of rent with the ATO or a registered tax professional, particularly for mixed-use property or short stay accommodation.

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