GST on office rent and outgoings

Why the quoted number is not the invoiced number

Commercial leasing is a taxable supply, so GST applies. The convention in the market is to quote rent exclusive of GST, because most tenants are registered and recover it, and quoting inclusive would make every building look ten per cent more expensive than its neighbours.

The practical consequence is that a proposal at a given rent will be invoiced at that figure plus ten per cent. When you are comparing two proposals, check that both are quoted on the same basis before you compare them at all — this is the same trap as comparing a net rent against a gross one.

GST on outgoings catches people out

Where a landlord recovers outgoings from you, GST applies to that recovery. It applies even to components the landlord did not themselves pay GST on, such as council and water rates, because what is being taxed is the supply from the landlord to you, not the underlying expense.

That is why an outgoings estimate and an outgoings invoice can look different by ten per cent, and it is worth confirming on the proposal whether the outgoings figure quoted is inclusive or exclusive.

Where it actually costs you something

For a registered business GST on rent is recoverable, so over a year it nets out. The cost is timing: you pay it monthly and recover it when you lodge, so it sits on your working capital in between.

It matters more in two places. Security is normally calculated on rent including GST, so the tax inflates the amount of cash tied up in a bank guarantee for the whole term. And a business not registered for GST — or one making input-taxed supplies — cannot recover it at all, in which case ten per cent is a real and permanent addition to occupancy cost.