If you lease premises, you need to include your rental income in your tax return. You may be able to claim deductions for expenses related to the property. You may also be liable for goods and services tax (GST) and entitled to GST credits.
Commercial property owners have obligations for:
As a commercial property owner, if you choose to lease the premises to others you:
- must include the full amount of rent you earn in your income tax return
- can claim a deduction for your related expenses for the period your property is rented or available for rent
- can generally claim an immediate deduction for expenses relating to the management and maintenance of the property, including interest on loans.
Other expenses are claimed over a number of years, including depreciation costs (such as the decline in value of depreciating assets – for example, carpet, furniture and appliances) and certain construction expenditure.
You can't claim a deduction for expenses you incur for:
- acquisition and disposal costs of the property – these are usually included in the property's cost base for capital gains tax purposes
- expenses not actually paid by you, such as water or electricity charges paid by tenants
- expenses not related to the rental property.
If you're registered, or required to be registered for GST, you're liable for GST on the rent you charge on commercial premises.
You may be required to register for GST if you're dealing with property and your turnover from these activities exceeds the GST registration turnover threshold. This includes one-off transactions like buying, selling, leasing and developing (which may constitute conducting an enterprise).
You can generally claim GST credits on purchases that relate to renting out your property, such as the GST included in the managing agent's fees.
If you rent a commercial property as your business premises, the rent is deductible.
As the renter (tenant), you may be able to claim GST credits for the GST included in the rent if you and the lessor are registered, or required to be registered, for GST.
See also:If you lease premises, you should include rental income and deductions for expenses in your tax return. You may be liable for GST, and entitled to GST credits.