Your tax obligations as an investor can be complex and overwhelming, especially with commercial property.
There are many factors to consider before lodging your tax return at EOFY, from analysing lease commitments to property depreciation. And that’s just the beginning.
But in a bid to encourage commercial investment, the ATO offers property investors a variety of deductions, discounts, concessions, and exemptions.
So, what taxes are individuals liable to pay for commercial property?
The short answer is that investors are liable for tax on net rental income earned from commercial investments, as well as GST and Capital Gains Tax on sale profits.
However, in reality, it’s a little more complicated. This is because the tax is calculated differently depending on which type of entity owns the commercial property.
As an individual investor, rental income from each commercial property is incorporated into the assessable income and taxed at the same marginal rate.
When a commercial property is sold, an individual must pay Capital Gains Tax on the profit. This is also added to the assessable income at the same tax rate but is often subject to significant discounts.
And just like with any other product or service, individuals also need to pay GST on the sale price of commercial property. The only exceptions are if the margin scheme is used to work out the GST, or the property was a GST-free sale as part of an ongoing concern.
Individual Tax Deductions
Just like the different tax rates for ownership structures, there are also separate types of tax deductions.
That being said, individual commercial property investors can typically claim most management and maintenance expenses incurred. This includes site travel, loan interest, building repairs, advertising fees, and the costs of depreciation for both capital works as well as plant and equipment contained within it.
*Disclaimer: This article is for general information only and should not be relied on as advice. You should consider your personal situation and seek advice that is specific to your circumstances before making any decisions based on this information. If there are any issues you would like us to discuss with us arising from this article, please contact us*