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The rent on a bare residential lease is exempt from GST

A worked RES examination question on leasing gst, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.

Paper 2Lesson 5Leasing GSTFree — no sign-up

The question

An agent explains to a first-time landlord how GST bites, or does not, on a plain residential lease of his condominium, and separately on the commission she will charge for finding the tenant. The landlord assumes that if the rent is free of GST, so is her fee. Which statement is correct?

  1. A. Both the rent on his residential unit and her commission for finding the tenant are standard-rated for GST at the usual rate.
  2. B. Both the rent on his residential unit and her commission for finding the tenant are exempt from GST in the ordinary way.
  3. C. The rent on his bare residential unit is exempt from GST, while her commission for finding the tenant is standard-rated.
  4. D. The rent on his residential unit is standard-rated for GST, while her commission for finding the tenant is exempt.

The answer, and why

Answer: C

The rule. The rent on a bare residential lease is exempt from GST. The agent's commission, being a supply of agency services, is standard-rated. The residential exemption attaches to the rent, not to the professional's fee.

Why C is correct. Rent exempt, commission standard-rated.

The other options.

  • B exempts the commission too; the exemption does not reach agency fees.
  • A standard-rates the rent; residential rent is exempt.
  • D reverses both.

Exam note. Residential rent = exempt; agent's commission = standard-rated. The exemption follows the rent, not the fee.

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