November 8, 2021

Tax implications of rent concessions, property and commercial enterprises

If you’re a landlord, property owner or commercial enterprise operator who has been affected by the downturn in the economy, you may be wondering how to deal with your tax obligations. There are various schemes available from state and federal governments for landlords and property owners as well as commercial enterprises operators that can assist with much needed tax and rent relief. In this article we’ll take a closer look at some of these schemes.

Rent concessions

The impact of COVID-19 has meant that many businesses have experienced lockdowns and cash flow issues. Some struggling companies were eligible for rent concessions which could be classified as either a waiver or a deferral depending on which they qualified for.

Waiver

In the event that a waiver is the available rent concession, the tenant no longer needs to pay the amount of rent that has been waived.

Deferral

If the rent concession is a deferral, the tenant is still required to pay the amount of rent deferred, but the amount can be paid at a later stage.

Tenants should be aware that rent payments can have a significant impact on the cash flow of a business. It’s important that tenants who receive rent concessions from their landlords, and landlords who afford concessions, are aware of the difference between payments that are waived or deferred. Unfortunately, some people misunderstand what type of concession they’ve been afforded which can be detrimental to their business.

Property and commercial enterprises

If you own, lease or rent a property that is used for business purposes such as a shop or an office, it’s important to know the tax implications and obligations that come with it.

If you are in possession of a property that is used for business purposes you:

  • must include any rental income in your tax return
  • can claim deductions for some property expenses
  • will be liable for capital gains tax on any capital gain if you sell the property
  • may have GST obligations and entitlements.

You may have additional tax obligations, including those relating to one-off transactions, such as the buying, selling, leasing or developing of property). These could result in the Australian Taxation Office deciding that these activities should deem you as conducting an enterprise and requiring a GST registration, if your turnover from them is more than what’s allowed before reaching any limits.

In conclusion

If you’re a landlord, it’s important to be aware of the tax implications and obligations that come with owning property used for business purposes. If your tenants are struggling in this tough economy, they may be eligible for rent concessions which can either take the form of a waiver or deferral depending on what their circumstances qualify them as. It’s also important that landlords understand how any rental income received will affect their taxes because it might mean they have additional reporting requirements.

If you want professional advice and more information about tax and potential concessions, get in touch with us today!

Filed Under: General, Tax

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