When it comes to GST on outgoings for commercial leases in Victoria, both landlords and tenants often find the subject confusing. Here’s a breakdown to help clarify when GST is applicable on outgoings.

When is GST Applicable?

Whether a commercial tenant is required to pay GST on outgoings depends on several factors:

Landlord's GST Registration
If the landlord is registered for GST.

Taxable Supply
Whether the supply of the relevant service is considered a taxable supply under the GST Act.

Lease Agreement
Whether the lease allows the commercial landlord to pass on GST to the tenant.

Water and Sewerage Services

Supplies of water and sewerage services to the landlord can be GST-free. However, if the supply to the tenant involves an incidental provision of water, this will not be a supply of water for GST purposes. Unless the lease specifies that the landlord will make a separate supply of water to the tenant, any contribution by the tenant towards the landlord’s expenditure on water is not considered a GST-free supply of water. If the supply of premises is taxable, any amount payable by the tenant in respect of water or sewerage will be subject to GST.

Best Practices

It's crucial to have a thorough understanding of the legislation when charging outgoings. Facilitate invoices accordingly to ensure compliance. At First National Commercial Neilson Partners, we are well-versed in the legislation and welcome the opportunity to discuss your commercial property needs.

Note: This information is not financial advice. Always consult with your accountant or financial representative to ensure accuracy.