Do You Pay GST on Commercial Property? Guide for SMSF Trustees

By Mike Wilczynski, Certified Property Valuer and Chartered Accountant · Updated August 2026

GST applies to most commercial property transactions in Australia, including sales, leases, and transfers into an SMSF. The standard rate is 10%, and it can add tens or hundreds of thousands of dollars to the cost of a deal, or create significant cashflow obligations for landlords and tenants. But there are important exceptions, and getting the GST treatment wrong on a commercial property transaction is one of the most expensive mistakes in Australian tax. This guide explains when GST applies, when it does not, how the margin scheme and going concern exemptions work, and what SMSF trustees specifically need to understand about GST on commercial property they hold or are acquiring.

The short answer: yes, in most cases

If you are registered for GST (or required to be) and you sell, lease, or otherwise supply commercial property in the course of your enterprise, GST applies at 10%. This is the default position under Division 9 of the A New Tax System (Goods and Services Tax) Act 1999 Commercial property includes offices, retail premises, warehouses, factories, industrial units, commercial land, and any property that is not residential premises. Residential property is generally input taxed (GST-free on sale of existing residential premises, or subject to GST on new residential premises), but that is a separate regime, this article focuses on commercial property only.

When GST applies to commercial property

Sale of commercial property

If you sell commercial property and you are registered for GST (or your annual turnover exceeds $75,000, making registration compulsory), GST is payable on the sale price. The buyer pays the GST-inclusive price, and the seller remits the GST component to the ATO through their Business Activity Statement (BAS). For a property sold at $1,000,000 plus GST, the total price to the buyer is $1,100,000. The seller reports $100,000 GST collected and remits it to the ATO (offset by any input tax credits the seller can claim on costs related to the sale).

Leasing commercial property

Commercial rent is a taxable supply. If the landlord is registered for GST, they must charge GST on the rent and outgoings passed through to the tenant. The tenant pays rent plus 10% GST. The landlord remits the GST to the ATO, and the tenant (if GST-registered) claims the GST paid on rent as an input tax credit. For a monthly rent of $5,000 plus GST, the tenant pays $5,500. The landlord remits $500 to the ATO. If the tenant is GST-registered and uses the property for taxable purposes, they claim back the $500 as an input tax credit, making GST cost-neutral for the tenant.

Fit-out, improvements, and capital works

GST also applies to construction costs, fit-out, repairs, and maintenance on commercial property. If you are GST-registered, you can claim input tax credits on these costs. This is a significant benefit for SMSFs that hold commercial property, the fund can recover 10% of the cost of improvements through the BAS.

When GST does NOT apply

There are two main exemptions that can make the sale of commercial property GST-free: the going concern exemption and the margin scheme (which reduces GST rather than eliminating it entirely).

Going concern exemption

Under Division 38-J of the GST Act (going concern exemption), the sale of a commercial property is GST-free if it is sold as a going concern. This means the property is sold as part of an ongoing enterprise, and the buyer intends to continue operating it. Both parties must agree in writing that the sale is a going concern, and both must be registered for GST at settlement. For the going concern exemption to apply, the ATO requires that:

• The seller supplies all things necessary for the continued operation of the enterprise, for a commercial property, this typically means existing leases, tenant agreements, and property management arrangements transfer to the buyer
• The seller carries on the enterprise up to the day of supply (settlement)
• Both parties are registered for GST
• The contract explicitly states the supply is a going concern

This exemption is commonly used when selling a tenanted commercial property. The existing leases continue, the rental income stream transfers, and the buyer steps into the landlord’s position. If all conditions are met, no GST is payable on the sale, saving the buyer 10% of the purchase price. Warning: If the going concern conditions are not properly met (for example, the property is vacant at settlement, or the contract does not contain the required statement), the ATO can retrospectively apply GST to the sale. This can result in an unexpected liability of 10% of the sale price, plus interest and penalties. Get legal and tax advice before relying on this exemption.

Margin scheme

The Division 75 of the GST Act (margin scheme) does not eliminate GST, it reduces the amount of GST payable by calculating it on the margin (profit) rather than the full sale price. It is available where the seller did not claim input tax credits on the original purchase (for example, because they bought the property before GST was introduced on 1 July 2000, or they bought it from a non-GST-registered seller, or under the going concern exemption). Under the margin scheme, GST is calculated as one-eleventh of the margin:

Method	Purchase Price	Sale Price	GST Payable
Standard (no margin scheme)	$500,000	$900,000	$81,818 (1/11 of $900,000)
Margin scheme	$500,000	$900,000	$36,364 (1/11 of $400,000 margin)

The margin scheme saves $45,454 in GST in this example. However, both parties must agree in writing to use the margin scheme before settlement, and the buyer cannot claim an input tax credit on the purchase if the margin scheme is used. This trade-off is important, a buyer who intends to claim an ITC may prefer the standard method.

GST and SMSFs: what trustees need to know

For SMSF trustees holding or acquiring commercial property, GST creates specific obligations and opportunities that differ from individual property ownership.

Does my SMSF need to register for GST?

An SMSF must register for GST if its annual turnover from taxable supplies exceeds $75,000. For most SMSFs that hold a single commercial property, the rental income alone may push the fund over this threshold. If the annual rent on the property is $80,000, the fund’s GST turnover exceeds $75,000 and registration is compulsory. Even if the fund is below the threshold, voluntary GST registration can be beneficial, it allows the fund to claim input tax credits on property-related expenses (repairs, maintenance, management fees, valuations, legal costs). The decision depends on whether the ITC benefit outweighs the compliance cost of lodging quarterly BAS returns.

GST on rent from related party tenants

One of the most common SMSF structures involves the fund owning a commercial property and leasing it to a member’s business. This is permitted under the SIS Act for business real property, but the lease must be on arm’s length terms, including GST treatment. If the fund is GST-registered, it must charge GST on the rent to the related party tenant, just as it would to any other tenant. The tenant’s business claims the GST as an input tax credit (assuming it is also GST-registered and uses the property for taxable purposes).

GST on property acquisition by the SMSF

When an SMSF purchases commercial property, the GST treatment depends on the sale structure:

• Standard sale: The fund pays the GST-inclusive price and claims the GST back as an input tax credit (if registered)
• Going concern: No GST is payable, but the fund must continue operating the property as a going concern
• Margin scheme: The fund pays the margin scheme price, but cannot claim an input tax credit on the purchase

For SMSFs using a Limited Recourse Borrowing Arrangement (LRBA) to acquire the property, the GST position needs careful planning. The holding trust (bare trust) that holds legal title during the LRBA period may need its own GST registration, and the cashflow impact of paying GST at settlement (before the first ITC refund comes through) must be factored into the fund’s liquidity.

GST on in-specie transfers

If a member transfers business real property into the SMSF as an in-specie contribution, GST may apply if the member is GST-registered and the transfer is a taxable supply. The GST treatment depends on whether the member was carrying on an enterprise in relation to the property. If the member was leasing the property and was GST-registered, the transfer may attract GST, which the fund can then claim as an input tax credit if it is also GST-registered.

GST on commercial property valuations

A question we are often asked: is GST included in the valuation figure? The answer depends on the purpose of the valuation:

• Market value for financial statements: Generally expressed exclusive of GST, the fund reports the property’s value net of any GST component
• Market value for a sale: The contract should specify whether the price is GST-inclusive or GST-exclusive, and the valuation should state which basis it uses
• Rental assessment: Should specify whether the assessed market rent is GST-inclusive or GST-exclusive, most commercial leases quote rent plus GST

Our valuation reports clearly state the GST basis of all figures to avoid ambiguity for trustees, auditors, and the ATO.

Common GST mistakes on commercial property

Not registering for GST when required. If the fund’s commercial rental income exceeds $75,000 and the fund is not GST-registered, the ATO can backdate the registration and assess GST on all rent received from the date registration should have occurred, plus interest and penalties. Relying on the going concern exemption without meeting all conditions. The most common failure is the property being vacant at settlement (no tenants, no ongoing enterprise). If the exemption fails, the seller owes the ATO 10% of the sale price. In some cases, the buyer may also face consequences if they were relying on the exemption to avoid paying GST. Not agreeing on the margin scheme before settlement. The margin scheme must be elected in the contract of sale. If it is not documented before settlement, the standard GST method applies by default, and the seller pays GST on the full sale price. Confusing GST-inclusive and GST-exclusive pricing. A lease that states “$5,000 per month” without specifying GST can create disputes. Is it $5,000 plus GST ($5,500 total) or $5,000 inclusive of GST ($4,545.45 rent plus $454.55 GST)? Always specify in the lease. Forgetting GST on outgoings. When a commercial lease requires the tenant to pay outgoings (council rates, water, insurance, body corporate), GST applies to the reimbursement of those outgoings if the landlord is GST-registered. Some landlords forget to charge GST on outgoings passed through, creating an under-remittance to the ATO.

GST and the BAS: practical compliance

If your SMSF is GST-registered, you must lodge a BAS, typically quarterly for most SMSFs. The BAS reports:

• GST collected (Label 1A), GST charged on rent and any other taxable supplies
• GST paid (Label 1B), GST paid on property expenses, management fees, valuations, repairs, insurance, and other costs where an input tax credit is available

The difference between GST collected and GST paid determines whether the fund owes GST to the ATO or receives a refund. For funds with high property-related expenses (e.g. during a renovation or fit-out), BAS refunds can provide useful cashflow.