GST is one of those commercial lease issues that often receives little attention until the invoice arrives.
A tenant may sign a lease expecting a certain monthly rent, only to later receive invoices showing GST added to rent, outgoings, management fees, rates, insurance or other charges. In some cases, the issue arises after a change of landlord, a new property manager, or a different invoicing system.
For small businesses, this can affect cash flow quickly. A 10% GST component may not sound significant when discussed in isolation, but across rent, outgoings and other lease charges, it can become a material operating cost.
The key question is not simply “Can the landlord charge GST?” The better question is:
What does the lease actually say, is the landlord registered or required to be registered for GST, and has GST been calculated correctly?
This article explains the lease issues tenants should check before accepting GST charges on commercial lease invoices.
GST is not only a tax issue. It is also a lease drafting issue.
GST is governed by tax law, but in a commercial leasing dispute the starting point is usually the lease.
A properly drafted commercial lease should say whether rent and other amounts are:
GST inclusive
GST exclusive
payable plus GST
subject to a GST gross-up clause
recoverable only if the landlord is liable for GST
recoverable as part of outgoings
recoverable only with a valid tax invoice
Small wording differences matter.
For example, “$5,000 per month plus GST” is not the same as “$5,000 per month inclusive of GST”. If the lease is unclear, the tenant and landlord may end up in dispute over whether GST is already included in the agreed rent or whether it can be added on top.
This is why tenants should not only check the commercial deal. They should check the GST clause, rent clause, outgoings clause and tax invoice requirements before signing.
When GST commonly appears in commercial leases
GST issues commonly arise in relation to:
base rent
outgoings
promotion or marketing levies
management fees
cleaning costs
insurance contributions
council rates and water charges
repairs and maintenance charges
licence fees
car parking charges
late payment interest or administration fees
The Australian Taxation Office states that commercial premises leasing may involve GST obligations, and tenants may be able to claim GST credits for GST included in rent if both the tenant and lessor are registered or required to be registered for GST. (Australian Taxation Office)
For landlords, the ATO also states that if a person is registered or required to be registered for GST and leases commercial premises, GST must be included on the supply of the premises. (Australian Taxation Office)
However, the legal and accounting position still depends on the lease terms, the GST status of the landlord, the nature of the supply, and the way the invoice is calculated.
The landlord’s GST registration status matters
A commercial landlord’s GST position can affect whether GST appears on rent and outgoings.
Under ATO guidance, the general GST registration threshold for a business is $75,000 in projected GST turnover, with a higher threshold for non-profit bodies. (Australian Taxation Office)
This can become relevant where ownership of a commercial property changes. For example, a previous owner may not have been registered for GST, but a new owner may be registered or required to be registered. The Queensland Small Business Commissioner has noted this type of scenario in the context of tenants suddenly seeing GST charged after a change in property ownership. (Queensland Small Business Commissioner)
From a tenant’s perspective, the issue should be checked carefully. A change in landlord or property manager does not automatically mean every new charge is correct. The tenant should review the lease, check the invoice wording, and obtain accounting advice where necessary.
Change of landlord: can GST suddenly be added?
A change of landlord can create confusion.
A tenant may have been paying rent without GST for years. After the property is sold, the new owner or new agent may start issuing tax invoices that include GST. The tenant may then ask whether the landlord is allowed to do this.
There is no single answer without reviewing the lease and the tax position.
The important issues include:
whether the new landlord is registered or required to be registered for GST
whether the lease says amounts are GST inclusive or plus GST
whether the lease contains a GST gross-up clause
whether the invoice is a valid tax invoice
whether GST has been added to the correct amounts
whether GST has been duplicated
whether the tenant can claim input tax credits
whether the tenant is registered for GST
whether the charges are properly recoverable under the lease
A tenant should not assume the invoice is wrong simply because GST was not previously charged. Equally, the tenant should not assume the invoice is correct simply because it came from the landlord or managing agent.
GST on outgoings can be misunderstood
Outgoings are operating costs related to the premises that a landlord may pass on to the tenant under the lease. The QSBC describes common recovery methods as direct recovery, net lease recovery and gross lease recovery. (Queensland Small Business Commissioner)
In Queensland commercial leases, outgoings may include items such as council rates, water and waste charges, fire protection services, insurance, cleaning, rubbish removal, gardening, centre management fees and utilities, depending on the lease. (Queensland Small Business Commissioner)
GST on outgoings can become contentious because tenants may see GST applied to an outgoing that originally did not appear to include GST, such as council rates. The ATO’s GST Determination GSTD 2000/10 addresses whether outgoings payable by a tenant under a commercial property lease form part of the consideration for the supply of the premises. (Australian Taxation Office)
For tenants, the practical point is this: do not assess the invoice only by looking at whether the original supplier charged GST. The lease structure and GST law may affect how outgoings are treated when recovered by the landlord.
That said, QSBC guidance also notes that GST cannot be added on top of pre-existing GST. (Queensland Small Business Commissioner)
If the calculation is unclear, tenants should request an itemised breakdown and obtain advice from their accountant or tax adviser.
Watch for GST duplication
One of the most important checks is whether GST has been duplicated.
For example, a tenant should review whether:
the lease rent is already GST inclusive
GST has been added to a GST-inclusive amount
GST has been applied twice to the same outgoing
the landlord has charged GST on an amount that is not recoverable under the lease
the landlord has charged GST on a prohibited or non-recoverable cost
the invoice does not match the lease wording
the outgoing statement and tax invoice use inconsistent figures
A tenant should not simply pay a disputed GST amount without understanding how it was calculated. Once a pattern of payment is established, it may become harder to challenge later.
Retail shop leases need extra care
Retail shop leases in Queensland have additional rules under the Retail Shop Leases Act 1994.
For retail tenants, outgoings are not simply whatever the landlord decides to pass on. QSBC guidance notes that for a retail shop lease, the tenant is only responsible for outgoings if the lease specifies the outgoings payable, how they are determined and allocated, and the recovery process. (Queensland Small Business Commissioner)
The QSBC also notes that certain costs cannot be charged to retail tenants, including examples such as land tax, excess payments under the landlord’s insurance policy, and a body corporate sinking fund, although body corporate fees may be recoverable. (Queensland Small Business Commissioner)
This matters because GST is not the only issue. Before arguing about GST on an outgoing, the tenant should first ask whether the outgoing itself is recoverable under the lease and applicable retail leasing legislation.
If the outgoing is not recoverable, then the GST treatment may become secondary.
What tenants should check before paying GST invoices
When a GST issue arises, tenants should review the matter systematically.
First, check the lease. Look at the rent clause, GST clause, outgoings clause, tax invoice clause and any special conditions. Confirm whether amounts are GST inclusive or payable plus GST.
Second, check the landlord’s GST status. If the landlord is registered or required to be registered for GST, GST may apply to commercial rent and recoverable charges.
Third, check whether the charge is recoverable. If the lease does not allow the landlord to recover a particular outgoing, the tenant should not assume it is payable merely because it appears on an invoice.
Fourth, check the calculation. Ask whether GST has been added to the correct amount, whether the amount was already GST inclusive, and whether the outgoing has been properly apportioned.
Fifth, check tax invoice compliance. If the tenant is registered for GST and wants to claim GST credits, the tenant should ensure it has a proper tax invoice and should speak with its accountant.
Finally, check cash flow. Even if GST is claimable later, the tenant may still need to pay it upfront. This can affect budgeting, especially for small businesses.
What landlords should check before issuing GST invoices
Landlords should also take care.
Before issuing invoices, landlords and managing agents should confirm:
the landlord’s GST registration status
the wording of the lease
whether rent is GST inclusive or exclusive
whether the lease allows GST to be added
which outgoings are recoverable
whether the outgoing is permitted under retail leasing legislation
whether the invoice is correctly calculated
whether the tenant has been given the required statement or supporting material
whether the invoice is a valid tax invoice
A poor invoicing process can create unnecessary disputes, delay payment and damage the commercial relationship.
Common GST dispute scenarios
GST disputes in commercial leases often arise where:
a new landlord starts charging GST after purchasing the property
a new managing agent changes the invoicing format
the lease rent was negotiated verbally but the written lease says something different
GST is added to outgoings without explanation
the tenant believes the rent was agreed as GST inclusive
the landlord charges GST on a cost that is not recoverable under the lease
the tenant is not registered for GST and cannot claim GST credits
a retail tenant is charged outgoings that may be restricted under legislation
the landlord provides insufficient breakdown of the invoice
the tenant pays for months before questioning the calculation
These disputes are usually easier to manage early. The longer incorrect invoices continue, the more difficult the accounting and legal position becomes.
When should a tenant get advice?
A tenant should consider getting advice if:
GST has suddenly been added to rent or outgoings
the landlord has changed ownership or property managers
the lease wording is unclear
the tenant is unsure whether the amount is GST inclusive
the tenant believes GST has been charged twice
the tenant does not understand the outgoing statement
the landlord refuses to provide a breakdown
the tenant is under a retail shop lease
the amount in dispute is significant
the tenant is considering withholding payment
Tenants should be careful before refusing to pay an invoice. Withholding rent or outgoings may create a lease breach if handled incorrectly. Legal advice should be obtained before taking that step.
How Ensure Legal can assist
Ensure Legal can assist tenants and landlords with the legal side of GST issues in commercial leases.
For tenants, we can review the lease and identify whether GST and outgoings have been charged consistently with the lease terms. We can also advise on recoverability of outgoings, retail shop lease restrictions, breach risk and correspondence with the landlord or property manager.
For landlords, we can assist with lease drafting, GST clauses, outgoings clauses and dispute management to reduce uncertainty in future invoicing.
GST itself is a tax issue, so tenants and landlords should also speak with their accountant or tax adviser about GST registration, BAS reporting, input tax credits and tax invoice requirements.
Speak with a commercial lease lawyer before the issue becomes a dispute
GST charges in commercial leases can look like a small accounting issue, but they often reveal a deeper lease interpretation problem.
Before paying disputed invoices, withholding payment, or signing a new lease, tenants should understand what the lease actually allows.
Ensure Legal can review your commercial lease and help you identify GST, outgoings and payment risks before they become costly disputes.
Contact Ensure Legal for commercial lease review and advice in Queensland.
FAQ
Can a landlord charge GST on commercial rent?
In many commercial leasing situations, GST may apply if the landlord is registered or required to be registered for GST. The lease should also be reviewed to confirm whether rent is GST inclusive or payable plus GST.
Can GST be added after a property is sold?
It may be possible if the new landlord is registered or required to be registered for GST and the lease allows GST to be recovered. However, the lease wording and invoice calculation should be reviewed carefully.
Can GST be charged on outgoings?
GST may apply to outgoings recovered under a commercial lease, depending on the lease structure and GST law. Tenants should check whether the outgoing is recoverable, whether GST has been calculated correctly, and whether GST has been duplicated.
What does “plus GST” mean in a lease?
“Plus GST” usually means GST is added on top of the stated amount. For example, if rent is $5,000 plus GST, the tenant may be required to pay $5,500 if GST applies.
What does “GST inclusive” mean?
“GST inclusive” usually means the stated amount already includes GST. The landlord generally should not add another 10% on top of a GST-inclusive amount.
What should I do if I think GST has been charged incorrectly?
Request an itemised breakdown, review the lease, check whether the landlord is registered for GST, and speak with your accountant or tax adviser. If the issue relates to lease interpretation or recoverability of charges, obtain legal advice.
Can I refuse to pay GST if I disagree with the invoice?
Tenants should be cautious. Refusing to pay rent or outgoings may create a lease breach. Get legal advice before withholding payment.
Can Ensure Legal give tax advice?
Ensure Legal can advise on the lease, legal obligations, outgoings, recoverability, drafting and dispute issues. For GST reporting, GST credits and tax treatment, you should speak with your accountant or tax adviser.
Before signing or renewing a lease, request a commercial lease review to check how GST, outgoings and invoicing are allocated.
For advice on GST clauses, outgoings and other occupancy costs, speak with our commercial leasing legal services.
