Buying Commercial Premises – Commercial Property Tax
When you buy or otherwise obtain a commercial property – such as a shop, factory or office – it’s important to keep records right from the start.
Commercial properties used in the running of a business are subject to capital gains tax. You’ll need records of the date and costs of obtaining the premises so that you can work out your capital gain (or capital loss) when you sell it.
Income Tax Deductions
If your property is used to run a business or is available to rent for that purpose, you can claim tax deductions for expenses associated with owning it, such as interest on a loan to buy the property and maintenance expenses. Keep records of your expenses from the start, so you can claim everything you’re entitled to.
If you buy commercial premises, you may be eligible to claim a credit for the GST included in the purchase price.
You may also be able to claim GST on other expenses that relate to buying the property – such as the GST included in solicitors’ fees and on-going running expenses.
You can’t claim GST credits if:
- the seller used the margin scheme to work out the GST included in the price
- you purchase property from someone who is not registered or required to be registered for GST
- you purchase the property as a GST-free supply, or
- You’re not registered for GST.
Selling Commercial Premises
When you sell (or otherwise cease to own) a commercial property, you’re likely to make a capital gain or capital loss. Capital gains are subject to capital gains tax (CGT), with a discount for individuals and trusts, and concessions for small businesses.
You’re also generally liable for GST on the sale price and can claim GST credits on related purchases. To work out the GST you may be eligible to use the margin scheme, under which your GST liability is one-eleventh of the margin on the sale of the property, rather than one-eleventh of the total selling price.
GST doesn’t apply to property when it’s being sold as part of a GST-free sale of a going concern.