Sign In

* You are about to leave the Modoras website and be directed to Sage Handisoft - our cloud accounting software partners.

Insights

Tax implications of COVID-19 commercial rent concessions

jamesmorris_img1
Published by:
James Morris
Published on:
August 09, 2021
Modoras Accounting (QLD) Pty Ltd ABN 81 601 145 215
Tax implications of COVID-19 rent concessions

The Australian Taxation Office (ATO) has updated its advice regarding the tax implications of a landlord giving, or tenant receiving, rent concessions on a commercial property as a result of COVID-19.

These concessions include:

  • waivers — the tenant no longer needs to pay the amount of rent that is waived
  • deferrals — the tenant still needs to pay the amount of rent deferred but they can pay at a later stage.

Rent is generally incurred in the period the rent relates to or when it’s paid (whichever occurs first).

Implications for tenants

If you’ve received a rent waiver

If the waived rent is related to a past period of occupancy that you have already incurred and claimed a deduction for, you’re still entitled to that deduction.

However, if you’ve alreadypaid the incurred rent and it’s been waived and refunded to you, you’ll need to include this amount in your assessable income.

If you have not already paid the incurred rent and it’s been waived, the rent waiver will be a debt forgiveness.

When the debt you owe is forgiven, you make a gain. The amount isn’t usually included in your business’s assessable income — it’s offset against amounts that could otherwise reduce your business’s taxable income.

If the waived rent is related to a future period of occupancy, you won’t be entitled to a deduction for that amount.

If you’ve received a rent deferral

When you receive a rent deferral, you’ll still be entitled to a deduction for deferred rent when it’s incurred.

Implications for landlords

If you’ve given a rent waiver

If you’ve agreed to waive your tenant’s rent and your business uses the cash accounting method, you don’t pay income tax on the waived rent because you never collected that amount.

The story’s more complicated if your business uses the accruals accounting method; if you need help understanding the tax implications, give us a call on 1300 888 803.

If you’ve given a rent deferral

If you’ve agreed to defer your tenant’s rent and your business uses the cash accounting method, the rent will only become taxable at the point it’s ultimately received from your tenant.

The story’s more complicated if your business uses the accruals accounting method; if you need help understanding the tax implications, give us a call on 1300 888 803.

Get expert advice

As well as income tax and tax deductions, commercial rent concessions can have other tax implications for tenants and landlords (e.g. CGT and GST).

To understand more about how rent concessions affect you and how to maximise opportunities for your business, speak to an experienced accountant.

Contact us for a complimentary consultation at info@modoras.com or 1300 888 803.

Make tax time count. Know what you need to prepare for tax time this year.

IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.

Latest Insights