Tax implications of leasing commercial premises

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Leasing commercial premises, such as an office building, hotels or stores have their own struggles compared to being a residential landlord. Making the correct tax payment and knowing what you can and can’t claim is key in being a successful commercial landlord.

When leasing out a commercial property, you must include the full amount of rent in you earn in your income tax return. You can claim deductions for expense related to renting out the property for the periods it is being rented or is available for rent, such as:

  • Immediate deductions can generally be claimed for expenses relating to the management and maintenance of the property, including interest on loans.
  • Expenses such as depreciation costs of assets and certain construction expenditure can be claimed over a number of years.

Tax deductions cannot be claimed on:

  • Acquisition and disposal costs of the premise.
  • Expenses that you do not pay for, such as water and electricity costs that your tenants pay for.
  • Expenses that are not actually used for the commercial property.

As a commercial property landlord, you are liable for GST when your property is up for lease if you are registered, or required to be registered for GST. You can claim GST credits on your purchases that relate to renting out your property, such as managing agent’s fees subject to the normal GST credits rules.

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