Metrocity Realty

Investing? The GST and property management

The GST's relation to property management can be confusing.

You pay GST on most of the goods and services associated with holding a residential investment property, such as:

  • property management and associated fees;
  • materials and labour for repairs and maintenance;
  • body corporate fees, if your property is a strata-titled unit;
  • insurance.
You DON'T pay GST on council rates, water and sewerage fees. Nor is GST paid on rent.

Most businesspeople can separate their GST expenditure from the actual cost of the expense, then claim it back in full at the appropriate time.

But residential property investors are input-taxed. This means that while you pay GST on most goods and services for your property, you can't claim it back separately.

You can claim the GST-inclusive cost of these products or services as a regular tax deduction ... but only at your marginal rate, so you'll only receive a proportion of your original GST expenditure.

How to recover the shortfall?
You can't pass it on to your tenant by increasing the rent; rents are GST-free. Your best strategy is to maximise your rental income by investing in areas where demand for rental property is always strong.

And always check with your accountant or tax adviser.