Property Credit Logo

Navigating the GST on a Commercial Property Purchase: What First-Time Buyers Should Know

street view of a commercial property

Purchasing commercial property is a significant financial step, especially for first-time buyers. Whether you’re looking to expand your business or invest in real estate, understanding the purchase process and the various financing options available is essential. In this guide, we’ll walk you through key considerations, from traditional and alternative financing options to the often-overlooked 10% GST (Goods and Services Tax) on commercial property purchases. First-time buyers are often surprised to learn that GST must be paid upfront*, which is why we’ll also explore how short-term GST funding can help bridge the gap.

How does the purchase process work?

Once you find a property, you’ll need to conduct thorough research on the property’s location, potential rental yield, and zoning regulations. From there, you’ll likely engage professionals including a real estate agent, solicitor, and accountant to handle the due diligence, including title searches and contract negotiations. After making an offer and signing the contract, your deposit is required, along with additional costs like stamp duty, legal fees, and GST on the commercial property purchase.

Let’s talk finance

Before purchasing a commercial property, it’s important you first determine your budget and financing options. This may involve a traditional bank loan, non-bank lenders, or specialised financing. If you’re a first-time buyer, you might be surprised to learn that in Australia, buyers must pay 10% GST on top of the commercial property’s purchase price. Most bank loans don’t cover this cost and require you to come up with this amount yourself, so we’ll look at short-term GST loans as a solution.

1. Traditional bank loans

The most common route for commercial property financing is through a traditional bank loan. These loans often come with lower interest rates, but the approval process can be lengthy and stringent. Banks usually require a substantial down payment (typically 30%-40%), detailed financial statements and a solid credit history.

Pros:

  • Lower interest rates.
  • Established lenders with a long history of property financing.

Cons:

  • Banks typically don’t cover GST, which means you will need to come up with an additional 10% of the purchase price.
  • Stringent eligibility criteria and paperwork.

2. Non-bank lenders/ specialised commercial property financing

Non-bank lenders provide an alternative to traditional bank loans. These lenders can be more flexible, approving loans for buyers who may not meet strict bank criteria. However, non-bank loans usually come with higher interest rates to compensate for the added risk. Some offer specialised loans tailored to commercial property buyers that come with added benefits, like lower down payment requirements or flexible repayment terms, specifically designed for purchasing or developing commercial properties.

Pros:

  • Quicker approval process.
  • Flexible eligibility requirements.
  • Tailored for commercial property purchases.
  • May offer better terms for property development projects.

Cons:

  • Higher interest rates.
  • Shorter loan terms, meaning repayment must happen faster.
  • May still require substantial upfront costs.
  • Can be difficult to find.

3. Short-term funding for GST on commercial property

First-time buyers often overlook the GST factor when purchasing a commercial property in Australia. Buyers must pay 10% GST on top of the property’s purchase price and most bank loans don’t cover this cost.

Property Credit offers a short-term financing solution that covers 100% of the GST. This is especially helpful as the GST amount (in most cases) is refundable from the Australian Tax Office (ATO), but the process can take up to 120 days, depending on your BAS cycle. During this period, the strain on your finances can cause major cash-flow headaches, which may jeopardise your transaction or future investments.

Why Property Credit?

  • Eases cash-flow strain: We bridge the gap by providing immediate funding, allowing you to better manage your finances for other important business or investment opportunities.
  • Flexible and quick: Our solution is fast and efficient.
  • Full GST coverage: We fund 100% of the GST on commercial property, so you don’t have to drain your savings or miss out on opportunities.
  • We handle your refund: Property Credit will lodge your BAS for you and liaise with the ATO for the GST refund.

This solution is ideal not only for first-time buyers but also for property professionals like sales agents, developers, and anyone involved in purchasing land, new builds, or development sites.

Key considerations for first-time buyers

  • Additional costs: Beyond the down payment and GST on commercial property, there are legal fees, valuation costs, and stamp duty to consider.
  • Cash flow: Ensure you have a buffer to cover these extra costs, especially since GST must be paid upfront.
  • Loan costs: Look for loans that align with your long-term goals. Short-term loans are helpful for bridging gaps, but you’ll need to consider the cost of your loan.

*when purchasing a vacant property.

Visit property.credit for more information on our services or you can contact us on 1300 829 536 (au) or 03 668 2144 (nz).

This article is for general information purposes only and is not intended as financial product advice. Consider seeking independent financial advice that relates to your individual circumstances.

Buy and sell property on your terms

There's so much to consider when buying or selling. Below are just some of the opportunities equity release can offer over the course of a property sale. 

icon of a cabinet with a lamp and plant

Furniture & Home Staging

Cover the costs of furniture and home decor staging for your property for sale.
icon of a calendar and a house

Fast Bridging Loans

Selling your property? Access up to 80% of its value with a Bridging loan.
icon showing a hand holding a house with a dollar symbol inside.

Buyer Deposit Facility

Fund your auction deposit using equity from the property you’re selling.
Icon of a house with a speech bubble that contains a dollar symbol inside.

Equity Release

Selling your property? Access up to 80% of its value.
Icon showing a megaphone with a starburst surronding.

Property Advertising

Fund up-front advertising costs when selling your property.
Icon showing a paint brush and a tin of paint

Pre-sale Improvements

Increase saleability with pre-sale improvements and staging.
Icon showing a house with a tool inside.

Investment Property Expenses

Cover costs related to your investment property and repay with rental income.
Icon showing a hand holding an invoice document with a dollar symbol and data table.

GST Loan

Need to fund the GST on your commercial property purchase? We've got you covered.

Related Articles

Equity Release vs Bridging Finance — What’s the Difference?

When it comes to accessing funds tied up in property, ‘bridging finance’ is a term you’ve probably heard of. It’s […]
Katherine
6 June 2024

Common Misconceptions about Bridging Loans

It’s no secret that bridging loans have surged in popularity in recent years. Offering speed and flexibility, bridging finance has […]
Katherine
16 May 2024

Tips for reducing financial stress over the holiday season

Tis’ the season for joy, celebration, time with loved ones, and…SPENDING! Between buying gifts, school holiday fun, entertaining and going […]
Katherine
6 December 2023

Why choose a non-bank lender?

It’s no secret that non-banks have gained major popularity over the years. Flexible lending criteria, specialised loan products and fast […]
Katherine
1 November 2023

Bypassing the ‘Subject to Sale’ Clause with Equity Release

When buying a house, having cash readily available can be a game changer, especially if you want to bypass the […]
Katherine
27 September 2023

Frequently Asked Questions

We’ve rounded up our most frequently asked questions all in one place. Something not covered? Contact us directly and one […]
Katherine
13 September 2023
crossmenuchevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram