Purchasing a commercial property can be a good investment.
However, before purchasing a commercial property, you should consider the following costs that you may need to pay in addition to the purchase price:
Goods and Services Tax (GST)
In the event that the vendor is liable to pay GST, it is common practice for the vendor to require the purchaser to remit payment of the vendor's GST liability.
Not all commercial transactions are subject to GST. It depends on the vendor's circumstances as to whether or not GST applies.
Stamp duty is assessed on the price that you have offered to pay for the property plus GST, in the event that the vendor is liable to pay GST.
If the value of the property is higher than the price that you are paying, stamp duty is assessed on the amount that is the greater of the price or the value.
There is a calculator available on Revenue NSW website which can be used to determine the amount of duty payable. Here is a link to the calculator on their website.
Costs incurred in carrying out due diligence enquiries
If you intend to develop the property, you may incur costs with respect to carrying out due diligence to ascertain the property's suitability for your development and the costs you may incur during development.
For instance, prior or current use of the property may have resulted in contamination being present. If contamination is present, you may need to carry out investigations on the land to determine the extent of the contamination and the costs involved in remediating the contamination.
There are also other costs that you may incur as a result of your commercial property purchase.
Before purchasing a commercial property, you should seek advice from your lawyer and your accountant to ensure that you are fully aware of the costs involved before committing to buy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.