Commercial lease duty
A commercial lease is a lease on property for commercial – not residential – use. Commercial use includes retail, business use or industrial use (for example, supermarkets, department stores and commercial accommodation).
If you pay a premium for your commercial lease, you may also be liable for commercial lease duty. A ‘premium’ is either a monetary or non-monetary price you pay – or agree to pay – for the lease. When you pay a large premium on the grant or transfer of your commercial lease, it indicates that a transfer of land may be part of your leasing arrangement.
You have to pay conveyance duty once your premium amount goes over the threshold of 25 per cent above market rent over the term of the lease. This threshold ensures that when you pay a minor premium for a commercial lease – for example, in a competitive market – you will not owe commercial lease duty.
A premium doesn’t include payments that you could reasonably consider ‘rent reserved’. Rent reserved includes:
- market rent you pay or owe during the lease term
- any reasonable amount you pay or owe for the right to use the land under the lease – for example, rates, services and utilities, turnover rent or administration.
Calculating your duty
If you do pay a premium and your premium exceeds the threshold, you pay duty on the total premium component at the relevant rate when you took on the lease.
The ACT Revenue Office calculates commercial lease duty the same way it calculates conveyance duty for commercial properties.
To determine whether you have indeed paid a premium and exceeded the threshold of 25 per cent above market value, you need to take into account the items in the following list. You can deduct the payment of these items from the total amount you’ve paid – or agreed to pay – for the lease. Once you’ve taken out all reasonable rent reserved payments, you can estimate how much premium, if any, you’ve paid.
Examples of payments for the right to use the land include but are not limited to:
- market rent
- maintenance and repairs
- services and utilities
- insurance premiums
- legal costs that the lessee owes on behalf of the lessor for granting the lease
- car park contributions
- fit-out costs
- land rent
- gardening and landscaping
- turnover rent
Keep in mind that this list is not exhaustive and aims only to give you some guidance concerning the payments you can consider when determining the rent reserved you’ve paid.
For more information, refer to the latest version of Revenue Circular Commercial Leases: Duty Payable on Lease Premiums (DAA015.1).
If you’re a lessee and your lease premium exceeds the threshold, you need to lodge your lease document by SmartForm, attaching any documentation that helps determine the amount of commercial lease duty you owe, within 90 days of signing the lease.
Be sure that all of the details in your documentation are true and correct; giving false or misleading information is a serious offence.
After you lodge, we’ll email a Notice of Assessment to you and your legal representative (if applicable). You also have 90 days from the day of signing your lease to pay. If the Notice of Assessment has a nil balance, you do not have to take further action.
Visit our How to pay page for more information on paying your commercial lease duty.