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Generally, you need to charge GST when you lease out commercial property. This includes short-term leases and commercial accommodation like hotels, hospitals, residential care homes and some serviced apartments. 

How much you charge depends on how long your customer is staying and what kinds of services you offer. 

The difference between commercial and residential property

The 4-week rule

You’ll need to charge GST on the full value of accommodation for the first 4 weeks' stay. After 4 weeks, you charge GST at a lower rate on certain items.

However, if you agree up-front that a stay will be for more than 4 weeks, charge GST on 60% of the value of domestic goods and services from the start of the stay

Domestic goods and services

After 4 weeks, charge GST on only 60% of the value of the ‘domestic goods and services’.  

These usually include:

  • the right to stay on the property
  • cleaning and maintenance
  • electricity, gas, air-conditioning or heating
  • telephone (not tolls), television, radio or similar items. 

Non-domestic goods and services

Continue to charge GST as normal on the full value of these items or services:

  • food
  • toll calls
  • medication
  • nursing. 

Combined charges

You'll need to separate any combined charges that cover domestic and non-domestic goods and services. For example, bed and breakfast.

We'll need the non-domestic, fully taxable supplies (breakfast) separate from the domestic goods or services (bed).

Rest homes and private hospitals

When you’re providing accommodation in rest homes and private hospitals, you split the costs for domestic and non-domestic goods and services.  

These are the standard rates we allow for rest homes and private hospitals.

Rest homes

  • 45% domestic goods and services
  • 55% non-domestic goods and services

Private hospitals

  • 35% domestic goods and services
  • 65% non-domestic goods and services 

Changing accommodation type

You'll need to make a GST adjustment if you turn your commercial property into exempt long-term residential accommodation.

If you change the use of a property, you may need to make a GST adjustment when the property is sold or there is a change in use.

GST adjustments for business or private use

Example: changing property from commercial to residential

Smith Properties Ltd decides to convert their entire building to residential apartments. All commercial tenants vacate the building. The building is now used for non-taxable purposes (residential renting). Smith Properties Ltd must make a GST adjustment for the period the use changed to 100% non-taxable purposes.

Tax Technical advice

Find out more on our Tax Technical website.

IS 15/02: GST and retirement villages

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Last updated: 13 Dec 2023
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