FAQ: Why have I been charged GST on outgoings?

Water, council rates, and body corporate fees are examples of statutory outgoings that a Landlord pays to operate their premises. Though the Landlord may not have been charged GST for these outgoings, the tenant may be charged GST for the ‘on supply’ of this service. 

Many of our Tenants ask us how this could possibly be correct: surely the Landlord can’t just add GST on top of outgoings which don’t include GST…right?

Modo Property director Allison Collis simply explains why a commercial Tenant may be charged GST for outgoings. “Basically, you need to remember that there are two transactions occurring: the first is between the statutory body and the Landlord, then the second between the Landlord and the Tenant. It is also important to point out that the Landlord can only charge GST if they are registered for GST; also that GST charges cannot be added on top of pre-existing GST.”

Example One:

  1. Landlord receives an invoice for yearly council rates of $100. There is no GST charged.
  2. The Tenant receives an invoice from the Landlord to reimburse this charge per the terms of their lease. This is referred to as an “operating expense” or “OPEX” for short. The invoice is $110 as the Landlord is registered for GST.

Example Two:

  1. Landlord receives an invoice for owners corporate fees for $110 which is inclusive of GST.
  2. The Tenant received an invoice of $110 inclusive of GST as GST cannot be added on top of GST.

Example Three:

  1. Landlord who is not registered for GST receives an invoice for water rates of $100. There is no GST charged.
  2. The Tenant received an invoice for $100 with no GST applicable. 

The terms and conditions of each commercial lease vary but will clearly outline in the lease schedule what percentage of operating expenses the Tenant is responsible for reimbursing to the Landlord. 

If the Landlord is registered for GST, they are liable to remit GST to the ATO on the consideration that it is received from the tenant. The GST that is included in the on-charge to the Tenant is not profit or an additional fee: the Landlord is merely passing on a charge as they would with all other outgoings.

Still unsure or need further clarification? We’re always available to discuss this further or you can have a chat to your accountant.

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