PM Fee Calculation

Hi All,

Very Quick Question.

When Calculating a PM Fee, does it normally based on the rent + GST or just rent?

Eg. if PM fee is 5% +GST on net income and net income for the month was $11,000 (GST Inclusive),
Is the PM Fee $550? or $605?

 

Is this a commercial property?

 

The agent can't charge gst on a gst inclusive amount but can charge on a gst exempt charge eg. water or residential rent collected.

So $550 Or $605 could be the answer but it depends on the circumstances. What's it say in the Management Agreement?

 

You can't charge GST on GST.

This raises a point that many tradies get wrong when including their costs which usually include GST...and then add 10% GST at the end of the invoice. I've had many a debate about this and have heard every excuse under the sun. If they pay for parts at a hardware store and it's $110 incl. GST, they must either add the total amount after the GST calculation on their invoice, or remove the GST and total it at the end.

For example:

Parts - $110 (on hardware invoice)
Labour - $60

Tradies will often add the $110 and the $60, then add 10% GST to give a total of $187.00 which is incorrect.

They should add GST to their labour i.e. $60 + GST and then add the $110 to give a total of $176.00.

Some have said "well I get a discount on my parts"...??!?!?!?!

 

Exactly - a residential tenancy doesn't include gst nor gets gst added to the tenant however gst is added by the agent for the service of rent collection.

However, a commercial tenancy may be charged gst depending on the circumstances eg. LL is registered (doesn't matter if the tenant isn't), lease provides for collection/charging GST etc. Commission is charged on the gst exclusive amount.

 

Yes It is a commercial property I recently purchased and I think there's been some mistakes (I wish it's just a mistake) on billings (rent billing and PM fee billing). I'll try to get it fixed. if not, I'll need to find a new PM.

 

1. Are you registered for GST or required to be for the Commercial Property ?
eg Did you claim GST on the acquisition or were you reg for GST to use the going concern basis. OR is annual rent $75K plus. In those instances GST should apply to the rent.

2. The Agent should add GST to their charges etc. You may be able to claim the GST paid to offset the GST collected.

There are some anomolies with GST on commercial rent. They appear a mistake at first glance but can be correct. For example water use. When you bill the tenant for the water use (if applicable) then despite water being GST free you do have to add GST to it as its now not water but a part of the rental agreement and rent is subject to GST. So if water use is $100 the agent may show a cost of $100 (no GST) and then $110 is recovered from the tenant. When you do the BAS you pay the GST just like on rent.

 

Yes I am registered for GST since the rent's over $100k.

The concern I have is the agent calculated fees based on the GST inclusive rent.

on $11,000 (GST Inclusive) rent, they have charged $605(Inc GST)

I was expecting the fee to be $550 (Inc GST)
- 5% on $10,000 (before GST Rent Amount) = $500
- and add $50 for GST.

I have checked the management agreement and the estimated fee is $550 (Inc GST) but they charged $605.

 

Yep, sounds like the pm ticked the wrong box on tax, an easy fix.