Guide to commercial property taxes and deductions in Australia

While spared some of the investor tax and SMSF borrowing changes handed down in the 2026 federal budget, the commercial property sector remains subject to a comprehensive tax regime.

Unlike the residential sector, commercial properties are subject to Goods & Services Tax (GST) on top of many ongoing expenses that may deter first-time commercial investors from taking the leap to the commercial sector.

However, there is also a range of commercial property tax deductions that can offset the tax paid, making commercial property a viable option for some investment strategies.

Understanding commercial property taxation

There is a considerable difference between residential and commercial properties when it comes to taxation. In general terms, commercial properties can face higher tax rates, fewer exemptions, and, most significantly, are subject to Goods and Services Tax (GST).

Like the residential sector, commercial properties are subject to both federal and state government taxes which are levied during purchase, ownership, and sale. As with all taxation matters, it’s strongly recommended to seek specialist advice from a tax professional to ensure you are paying the correct amount of tax for your particular circumstances. Here’s a basic rundown of what taxes are levied on commercial property and when they apply.

Taxes that apply to commercial property

Purchase and transaction taxes

• Goods & Services Tax (GST): The 10% GST applies to most (but not all) commercial property transactions and is also levied on commercial rents and outgoings.

  • On sales: Commercial property sales contracts normally nominate the purchase price ‘plus GST’, with the buyer paying 10% on top of the sale price at settlement. However, a commercial sale can be GST-free if the property is sold as a ‘going concern’. This requires both parties to be registered for GST with a written agreement stating the lease and tenant will continue uninterrupted after settlement.

  • On rent: Landlords must add 10% GST to commercial rents and outgoings paid by the tenant. However, business tenants registered for GST can claim back the component paid on rent through their regular Business Activity Statements (BAS).
    For a full rundown on federal taxes involved in buying commercial property , see the Australian Taxation Office (ATO) website.

• Stamp Duty: This tax is levied by state or territory governments and varies considerably according to where the commercial property is located. Stamp duty on commercial properties in Australia varies from 0% to 5.95% with some states abolishing stamp duty on commercial properties in a bid to incentivise business investment. Below is a basic rundown of commercial stamp duty charges as at August 2026:

Taxes on ownership

• Land tax: Both residential and commercial property investors may be subject to land tax which is an annual tax imposed by state and territory governments. Land tax applies when the total value of an investor’s landholdings exceeds a certain threshold (this differs considerably between jurisdictions) and is levied whether land is vacant or built on.
  Commercial lease structures commonly allow landlords to pass land tax expenses onto their tenants as part of a property’s outgoings. Some jurisdictions treat commercial land differently to residential landholdings with rules, rates, and thresholds varying significantly depending on where the property is located.
  Here are some links to detailed land tax rates and regulations in each state and the ACT. (As at August 2026, the Northern Territory is the only Australian jurisdiction that doesn’t levy land tax.)

  • New South Wales

  • Victoria

  • Queensland

  • Western Australia

  • South Australia

  • Tasmania

  • Australian Capital Territory

• Income tax: Like all income-producing assets, commercial property is subject to income tax. Rental income, less deductible property expenses, must be declared in an annual tax return. The final tax rate depends on whether the commercial property is owned by an individual, a trust, or a company. It’s recommended to seek specialist advice from a tax professional to ensure the correct amount of tax is paid.

Taxes on selling

• Capital gains tax: This federal government tax is triggered when a property (or any investment) is sold for more than its purchase price. Individuals and trusts may quality for a 50% CGT discount if the property has been held for 12 months or more up until 30 June 2027. The calculation of CGT will change to an indexation-based system for gains made from 1 July 2027 and are subject to a minimum 30% tax rate. Companies will continue to pay a flat rate of tax without any discount.

• GST: Goods & Services Tax must be collected and paid by the seller on the sale of a commercial property where GST applies. Some sellers may be eligible to use the margin scheme which calculates GST liability as 1/11th of the margin on the property sale only, rather than the total selling price (which may include agent fees, etc.). This will depend on how and when you purchased the property.
  GST may also apply to the buying, selling, and leasing of some commercial residential premises, such as hotels, hostels, caravan parks, and other establishments providing accommodation. Different rules and concessions apply to short-term and long-stay accommodation. A tax professional is the best person to consult to be sure the correct amount of tax is paid.

For a complete rundown of current Australian Taxation Office advice on selling commercial premises, visit the ATO website.

Commercial property tax deductions

To effectively reduce the amount of tax paid, commercial property owners can also claim deductions. These can be used to reduce taxable income as long as the property is rented out or used to produce business income. Here’s a rundown of possible deductions:

Operating and maintenance expenses

The following costs can be claimed in the year the property owner pays for them:

• interest on a loan to finance the purchase of the property

• council and water rates

• building and public liability insurance

• property management and/or leasing agent fees

• repairs and maintenance

• cleaning, security, and pest control expenses

• compliance requirements, e.g. smoke alarms and fire systems

Commercial property owners can only claim deductions on out-of-pocket expenses they have paid themselves, not those passed onto tenants under their lease agreements.

Depreciation

Depreciation can be a significant deduction available to owners of income-producing properties. It recognises that as buildings and their assets age, they are subject to wear and tear, causing them to depreciate in value. Here’s a rundown of different types of depreciation:

• Capital works: This is a deduction claimable on the building’s structure and any permanently fixed assets. It is commonly referred to as a ‘building write-off’ and can cover rooves, bricks, mortar, electrical wiring, flooring, and other fixed assets. Depreciation can be claimed as a lower percentage over a longer time period or a higher percentage over a shorter time. (This will depend on the property’s construction commencement date and its use). Commercial properties qualify for capital works deductions if construction started after 20 July 1982.

• Plant and equipment: Property owners may also be able to claim for any plant and equipment assets they own - or those that tenants may have left behind. Plant and equipment refers to assets that can be easily removed from the property, including items such as carpets, air conditioning, ovens or rangehoods in kitchen areas, etc. These assets are depreciated based on each asset’s individual effective life as determined by the ATO.

• Renovations: Property owners can also claim depreciation for renovations on their properties, including those put in place by previous owners. For structural renovations to qualify for capital works deductions, they must have commenced within eligibility dates set by the ATO.

The ATO provides advice on depreciation and capital expenses and allowances. Formal depreciation schedules for tax purposes can be prepared by quantity surveyors or specialist accountants.

For a complete rundown on deductions for commercial property, see the ATO website.

Common commercial property tax mistakes

Negotiating commercial property taxes and eligible deductions can be a minefield and is best handled by a tax professional to avoid costly errors.

Here are some of the common mistakes with do-it-yourself tax when it comes to commercial properties:

• mistaking capital improvements as repairs and claiming the expense in one year instead of depreciating them over time as capital works

• overlooking GST obligations (including charging GST on rent and outgoings)

• not paying for a professional depreciation schedule to clarify deductions and ascertain what assets are eligible

• assuming old assets have no value when they can continue to qualify for depreciation

• failing to spread borrowing costs and/or major capital works across their effective lives (as determined by the ATO)

• failing to keep proper records

• errors in claiming total loan repayments as deductions (only the interest component is eligible to be deducted as an expense)

• mixing commercial loans with private use (any redraw of a commercial property loan for personal reasons negates interest being tax-deductible)

It can’t be overstated: it’s best to consult a tax professional to ensure deductions and tax are correctly calculated.

Commercial property tax planning tips

Here’s the best way to keep on top of commercial property tax requirements and potentially minimise your tax bill:

Maximise deductions

• Pay for a comprehensive, professional depreciation schedule for both capital works and plant and equipment to ensure you are claiming all that you are entitled to

• Claim deductions for loan interest, council rates, land taxes, insurance, and any property management or leasing fees (but only if they have been paid for by the owner, not passed on to tenants)

• Carrying out regular repairs or routine maintenance before the end of a financial year can reduce your tax for that year

Timing

• Pay upfront for major recurring expenses, such as interest or insurances, if possible, to be eligible for the full deduction for the year

• Time the sale of a property to potentially reduce the impact of capital gains tax (a tax professional or accountant can provide advice on alternative scenarios)

• Decommissioning or removing old assets prior to the end of a financial year can see their book value claimed as a tax deduction for that year

Compliance

• Keep meticulous records so your claims can be substantiated

• Review GST requirements and thresholds to ensure GST has been correctly levied and collected. Depending on leasing contracts, commercial property owners may be able to recoup any overlooked or missed payments from tenants. However, the ATO requires any shortfall to be covered by the landlord

• Review with your tax professional, accountant, and/or solicitor to determine whether your ownership structure is the most tax-effective and offers the best protection for your assets. Options include owning the property as an individual, a trust, a company, or through a self-managed superannuation fund (SMSF)

  Frequently Asked Questions

  What taxes apply to commercial property in Australia?

  Commercial properties are subject to a range of federal and state-based taxes, including a 10% Goods and Service Tax (GST) on sales and leases, state stamp duty on purchases, annual land tax, income tax on rental earnings, and capital gains tax (CGT) on any profit when the building is sold.

  Can commercial property investors claim tax deductions?

  Investors in commercial property can claim a range of tax deductions including interest on loans to purchase the property, ongoing operating costs such as rates and insurance, and depreciation on the property and its assets.

  It is strongly advised to consult a tax professional to be clear on eligible deductions and to ensure full depreciation entitlements are being claimed.

  What expenses are tax deductible for commercial property owners?

  Owners can claim operational costs such as loan interest, council rates, insurance, and property management fees. State and territory government land tax, based on the land value, can also be claimed. However, owners can only claim out-of-pocket expenses they have paid themselves and not passed on to tenants.

  Property owners can also claim depreciation on the property and its assets (capital works) as well as depreciation on removable assets (such as carpets, air conditioners, etc.). This should ideally be done via a comprehensive depreciation schedule and must be claimed over multiple years according to Australian Taxation Office regulations.

  How does depreciation work on commercial property?

  Commercial property owners can claim depreciation on wear and tear on an income-producing building and its fixed assets (such as walls, rooves, and structural alternations). Depreciation on capital works is generally claimed at a fixed rate of 2.5% a year over 40 years or 4% a year over 25 years. This is determined according to when construction of the building started and property use.

  Depreciation can also be claimed on ‘removable assets’ such as carpets, air conditioners, and some fixtures and fittings, according to Australian Taxation Office guidelines. It’s strongly advised seeking the services of a tax professional to ensure a comprehensive depreciation schedule is in place, and owners are claiming all the depreciation they are entitled to.

  Do I need to pay GST when buying a commercial property?

  Yes, 10% Goods & Services Tax (GST) generally applies to the sale of commercial property if the seller is registered (or required to be registered) for GST. GST is levied on top of the sale price as ‘plus GST’.

  However, whether you will be out-of-pocket for GST depends on the contract terms and your own GST status. Some commercial property sales can be GST-free if both parties are registered for GST and the property is sold as a ‘going concern’, that is, it has a tenant or tenants who will continue their lease after settlement.

  The Australian Taxation Office has guidelines on which sales are subject to GST as well as details on its margin scheme which the seller my apply to calculate GST in some circumstances.