Registered taxpayers must include the rent they receive in their GST (Goods and Services Tax) returns and pay the applicable GST to the government. As a tenant, you need to factor GST into your rent.
But even if you’re not renting a property, knowing how GST applies to rent is essential. For example, if you’re a business owner renting office space, you must be aware of the GST implications.
This is because any rent you pay is considered a business expense and can be claimed as an input tax credit. So it’s essential to understand how GST applies to rent, whether you’re a tenant or a property owner.
Renting commercial property
A great choice for business owners looking to grow their operations is to rent commercial property as a tenant. Unlike residential property, commercial property typically offers a larger space, allowing businesses to grow in size and scope.
Additionally, it’s critical that you comprehend and feel at ease with the lease terms. You can always use rental assistance options in Western Australia if this is too much for you. With the right property and lease, renting commercial property can be a great way to grow your business.
Do tenants pay GST on rent?
Tenants may be surprised to learn they must pay GST on their rent. This is usually the case when renting commercial or residential premises. Such tenants must disclose the amount of GST paid on their residential property rental to the Australian Tax Office. With the GST rentals, the cost of renting or buying sustainable building materials in Perth is now much more affordable.
As it applies to tenants, the GST is a rent tax. The GST paid by a tenant is calculated as a percentage of the rent they pay each month. The amount of GST depends on the rental amount and the type of rental property. Generally, the renter may be required to pay GST if the property is rented for business purposes.
GST benefits for tenants
Many tenants need to be aware that they can claim the Input Tax Credit (ITC) benefit when paying GST to the landlord. For example, if the rent paid is input taxed and the tenant pays GST to the landlord, then the tenant can claim the ITC benefit on the GST paid. You can do this by submitting a GST Return with the details of the GST paid along with the rent paid.
The tenant is eligible for the ITC benefit even if the landlord does not provide the GST invoice for the rent paid. The tenant should ensure that all the details mentioned in the GST Return are accurate, as any discrepancy in the details can lead to the rejection of the claim.
The tenant should also keep a record of all the relevant documents, such as rent receipts, GST invoices, etc., to support the claim. The ITC benefit can provide the tenant with a considerable amount of tax savings, so it is vital to make sure that the claim is valid and that all the details are correct.
When is GST registration mandatory?
Depending on your business, GST registration may be mandatory or optional. Generally, you’ll need to register for GST if your turnover or rental expenses exceed the current threshold limit. Most businesses’ current threshold limit is Rs 40 lakhs per year. The limit is Rs 20 lakhs per year if you’re a manufacturer. So if your business crosses either of these thresholds, you’ll need to register for GST. Once registered, you’ll have to charge GST on all goods and services you provide. And you’ll also have to file GST returns to the government every month.
Renting commercial property as a property owner
If renting out your home, you may have questions about how GST applies to your residential rental income. GST generally does not apply to residential rent, so you don’t need to register for GST or charge GST on the rent. However, there are some exceptions.
For example, if you rent out part of your home, such as a granny flat, and charge GST on the rental income, you must register for GST and collect GST on the rent. It’s worth asking a tax expert about whether or not you qualify for GST credits, though. Additionally, you can claim deductions for certain expenses related to renting out your homes, such as repairs, insurance, and advertising.