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GST on Long Term Leases |
All lessors with long term leases with fixed or no rent increases should see their legal adviser now to avoid being liable to remit 1/11th of the rent as GST without getting reimbursement from the Lessee. |
From 1 July 2005, long term non-reviewable leases entered prior to 8 July 1999 that were GST free, will be subject to GST. Lessors can now increase the rent to take account of GST. If the lessor and lessee cannot reach agreement on the new rent the lessor can refer the matter to arbitration:
- The lessor must first issue an initial offer of the new rent to the lessee.
- If the lessee does not reply or objects, the lessor may request appointment of an independent qualified assessor.
- The assessor must assess the rent increase to take account of GST less any savings to the lessor due to taxes abolished when GST was introduced eg savings in sales tax.
- The lessee either accepts the assessor's figure or, if not, must pay GST of 10% of the existing rent.
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julia.scully@cmlawyers.com.au
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