When is GST applicable (on a commercial property purchase)?

Understanding GST and the 'Going Concern' Exemption in Commercial Property Purchases

In Australia, GST, a 10% tax, is usually added to most goods and services. When buying property, however, there are specific rules. For this post, we focus specifically on commercial property.

GST is added to the property's purchase price, including additional costs like taxes and rates. This means if GST is applied, you'll also pay more in stamp duty.

Generally speaking, if you're purchasing a property with vacant possession, GST is likely to be applicable

If a property sale is part of an ongoing business, you might not have to pay GST. For this exemption to apply:

• You pay for the property.

• Both buyer and seller have GST registrations.

• Both agree in writing that it's a 'Going Concern'.

• The business continues as usual until the sale.

• The seller provides everything needed for the business.

When might this exemption apply?

• If you buy a leased commercial property.

• When you purchase a business and its property.

• For buildings where all or some units are leased.

The exemption doesn't apply if the business stops before the sale or if lease terms change suddenly.

Always get independent legal advice before seriously pursuing a property.

Further information from the ATO website:

If you purchase commercial property to use in your GST-registered business, you can claim the GST included in the purchase price. You may also be able to claim GST on other expenses relating to buying the property, for example the GST included in solicitor fees.

You can't claim GST credits if:

• the seller used the margin scheme to work out the GST included in the price

• you're not registered or required to be registered for GST

• the seller wasn't registered or required to be registered for GST.

#commercialproperty #propertyinvesting #truenorthba