Thinking of leasing out a commercial property or signing a lease as a tenant? Before you agree on the rent, you need to understand how GST applies to commercial rent in New Zealand — because it’s not optional, and it’s not always straightforward.
In most cases, commercial rent and GST go hand in hand. If the landlord is GST-registered, they’re legally required to add 15% GST to the rent, and that can significantly impact the final amount the tenant pays. But what happens if the lease doesn’t mention GST? Or if neither party is registered? That’s where confusion — and costly mistakes — often begin.
In this article, we’ll break down the essentials of GST on commercial leases in NZ: who’s responsible, how to structure lease agreements, what to check in your contract, and how to invoice rent properly. Whether you’re a property investor, business owner, or commercial tenant, understanding your commercial property GST obligations is a must. Let’s make it simple.
Does GST apply to commercial rent in New Zealand?
Yes — in most cases, commercial rent is subject to GST at 15% in New Zealand. If the landlord is GST-registered and leasing to a business, they’re generally required to charge GST on top of the rent. However, there are a few important exceptions.
You’ll need to consider GST if:
- The landlord is registered for GST.
- The lease is for commercial use, not residential.
- The agreement doesn’t state that the rent is GST-inclusive.
Failing to handle this correctly can cause disputes, tax errors, and even IRD penalties.
To learn more, see the IRD’s GST guide on commercial property rentals.
Who is responsible for charging GST on commercial rent?
The responsibility usually falls on the landlord — but the tenant must also understand their obligations and the impact on lease costs.
GST-registered landlords: what it means
If you’re leasing out commercial property and your turnover exceeds $60,000 per year, you’re likely required to register for GST. Once registered, you:
- Must charge 15% GST on rent.
- Are eligible to claim GST on related expenses (e.g., maintenance, legal fees).
- Must file GST returns regularly, either on the payment or invoice basis. → See: Payment basis or invoice basis
Need help getting set up? Our guide on how to become GST-registered walks you through it step by step.
Tenants: what to check before signing
Before signing a lease, tenants should:
- Confirm whether GST is included or excluded from the rent.
- Ask for the landlord’s GST number if unsure.
- Understand how it affects deductibility (if the tenant is also GST-registered).
If you’re unsure, we recommend speaking to a tax advisor or reviewing your lease with a specialist. At BH Accounting, we help business owners avoid surprises and stay compliant.
How to structure your commercial lease agreement with GST
A solid lease agreement prevents disputes down the road — and GST is one of the top areas of confusion. Clearly stating GST treatment in your contract protects both parties.
How GST clauses are worded
Look for this type of clause in your lease:
“The rental amount specified is exclusive of Goods and Services Tax (GST). The tenant shall pay GST in addition to the rent.”
If it simply says “inclusive of GST,” the rent already covers GST — meaning the landlord must deduct it from the total.
Common mistakes to avoid in lease wording
Avoid these errors when drafting or reviewing a lease:
- Not specifying whether rent is GST-inclusive or exclusive.
- Assuming GST doesn’t apply to small commercial tenancies.
- Forgetting to update lease agreements when GST status changes.
Bullet list of key clauses to include:
- Rent amount + GST clarification
- Tax invoice requirements
- GST registration status of both parties
- Dispute resolution process for tax-related issues
You may also want to compare this to zero-rated GST situations — like when land is sold as part of a going concern.
How to calculate and invoice GST on commercial rent
Getting the GST calculation right is essential — especially for landlords issuing tax invoices. Here’s how it works.
Monthly rent example with GST breakdown
Let’s say the base rent is $2,000/month (exclusive of GST):
| Item | Amount (NZD) |
|---|---|
| Base Rent (excl. GST) | $2,000 |
| GST (15%) | $300 |
| Total Rent (incl. GST) | $2,300 |
If your lease says “inclusive of GST,” then the breakdown is:
- Total rent: $2,300
- GST component: $2,300 × 3/23 = $300
- Base rent: $2,000
Invoicing correctly for GST
Landlords must provide valid tax invoices if they charge GST. Each invoice should include:
- The words “Tax Invoice”
- GST number
- Rent amount and GST amount separately
- Dates and invoice number
This ensures tenants can claim GST back if eligible — and helps keep your records tidy come filing time.
Need support with monthly invoicing or reconciling payments? BH Accounting can handle that for you.
What happens if you’re not GST registered?
If neither the landlord nor tenant is GST-registered, then GST isn’t charged — but you also lose the ability to claim back expenses with GST.
Common scenarios where GST does not apply:
- Landlord earns less than $60,000 in annual income (from all taxable activities).
- The lease agreement explicitly excludes GST.
- The property is mixed-use and not clearly commercial.
However, it’s risky to remain unregistered if you’re close to the threshold. IRD may require backdated registration — along with interest or penalties. Read more about your obligations in our GST registration guide.
Bonus for understanding commercial rent and GST
Sorting out GST early saves money, time, and compliance headaches later. At BH Accounting, we regularly help business owners, property investors, and first-time landlords manage:
- GST registration and returns
- Lease reviews and structuring
- Tax invoice management
- IRD audits and disputes
Want to talk it through? Contact us for a friendly, obligation-free chat — or learn more about us and how we work.
Conclusion
If you’re involved in a commercial lease — whether as a landlord or a tenant — understanding how GST applies to commercial rent in NZ is non-negotiable. From lease wording to monthly invoicing and GST registration, there’s a lot to get right… and just as much that can go wrong.
Most commercial rents are subject to 15% GST when the landlord is GST-registered. The key is to clarify GST treatment upfront, document it properly in the lease, and ensure invoices are compliant. If you’re unsure about how GST applies in your situation, it’s worth talking to a professional early on.
At BH Accounting, we help Kiwi businesses navigate tax rules and stay on the right side of the IRD. If you need help reviewing a lease, registering for GST, or setting up compliant invoicing systems, we’re here for you.
FAQ about commercial rent and GST
Is GST always included in commercial rent in NZ?
No. GST must be explicitly stated in the lease. If the landlord is GST-registered, they must charge GST, but the lease should say whether rent is exclusive or inclusive.
Do tenants need to pay GST separately?
Yes — if the rent is exclusive of GST, the tenant must pay GST on top of the base rent. This should be outlined clearly in the lease.
What if the lease doesn’t mention GST?
If GST isn’t mentioned, disputes can arise. The IRD may still require GST if the landlord is registered. It’s best to have clear GST clauses in every lease.
Can landlords claim GST on commercial property expenses?
Yes — if GST-registered, landlords can claim GST on eligible expenses such as legal fees, maintenance, and agent commissions.
Do you need to be GST-registered to lease a commercial property?
Not always, but if your total taxable turnover exceeds $60,000/year, registration is mandatory. Learn how to become GST-registered in our detailed guide.
Disclaimer
This article is for information only—not legal, financial, or tax advice. Every business is different, and rules change, so don’t make major decisions based on what you read here. If you’re unsure, talk to a professional—it’s cheaper than fixing a costly mistake later.