GST implications of selling a tenanted commercial property

The sale of any commercial property is normally subject to GST.  A common exception to this rule is the sale of a tenanted property by a GST registered entity.

When is a commercial property sale GST-free as a going concern?

If the sale is to a GST registered purchaser, the sale could be GST free as the supply of a “going concern”. The “going concern” in such transactions would be the leasing enterprise.

There are clear financial benefits for a purchaser if the property that is being purchased can be treated as the supply of a “going concern” and therefore GST free. Not only is GST not required to be paid but duty on the purchase will be calculated on the GST free price, not the price plus GST.

Does a vacant property still qualify as a going concern for GST purposes?

What if the tenant vacates the property or the lease ends before the property sells or before the property settles? Would the sale of that property still qualify as the supply of a going concern and therefore be GST free?

Ordinarily this would mean that the property is not being sold with a leasing enterprise and the sale is not the supply of a going concern for GST purposes and therefore not GST free.

However, if the building or part of the building that is vacant is available for lease and is being actively marketed to secure a tenant, the sale of the property will still be regarded as the supply of a going concern for GST purposes and therefore GST free.

How we can help

Our Commercial Real Estate team supports organisations across the full lifecycle of property transactions, from acquisition through to leasing, development and sale. We provide clear, practical advice to help you manage GST risk, structure transactions effectively and achieve commercially sound outcomes.

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^{Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.}