Base rent is the entry price, not the occupancy cost
A quoted commercial rent, whether advertised as a dollar figure per square metre or a flat annual amount, describes what a landlord charges for the space itself. It is rarely the full amount a tenant hands over each year. Under a net lease, the tenant pays that base rent and then separately reimburses the landlord for a share of the property's running costs, known as outgoings. Under a gross lease, the landlord folds most of those costs into a single all-in figure instead. Either way, the running costs exist; a net structure just itemises them, which is why comparing two listings on rent alone can be misleading.
What actually sits inside outgoings
Outgoings are generally split into two groups. Statutory outgoings are charges the landlord is billed for by government, such as council rates and water and sewerage rates, plus land tax in jurisdictions and lease types where it can be passed on. Operating outgoings cover the day-to-day running of the property and commonly include building insurance, common-area cleaning, security, gardening, fire safety compliance, lift and air-conditioning maintenance, the electricity used in shared areas and a fee for the agent or manager administering the building. NSW's Small Business Commissioner, in its consumer guidance for retail tenants, lists this same broad mix, plus items specific to shopping centres such as promotional fund levies. Whether any individual item is actually payable comes down to the lease itself: a cost only becomes a recoverable outgoing if the lease says so.
GST is charged on top, even when the landlord didn't pay it
The GST treatment of outgoings surprises a lot of tenants. The Australian Taxation Office's ruling GSTD 2000/10 confirms that outgoings a tenant pays under a commercial lease form part of the consideration for the taxable supply of the premises itself, not a separate reimbursement of the landlord's costs. In practice this means a GST-registered landlord charges GST on the outgoings it passes on, even for items such as council rates, water rates or land tax that never carried GST when the landlord originally paid them. The ATO's broader guidance on leasing and renting commercial premises confirms the same rent-and-outgoings package attracts GST where the lessor is registered, or required to be registered, and that a GST-registered tenant can generally claim that amount back as a credit. A tenant working out their real cost of occupancy needs to budget for outgoings inclusive of GST, not the pre-GST figure quoted in a lease negotiation.
Retail tenants get more protection, and it varies by state
Retail leases, unlike general commercial leases, are regulated in each state, and the protections around outgoings differ noticeably. In New South Wales, the Retail Leases Act 1994 caps what a landlord can recover for land tax: under section 26, a tenant's liability is limited to what the land tax would have been if the leased land were the only property the landlord owned, stripping out the effect of the landlord's broader portfolio pushing the tenant into a higher land tax bracket. Victoria goes further. The Victorian Small Business Commission's guidance on outgoings confirms that under the Retail Leases Act 2003, land tax is not a recoverable outgoing from a retail tenant at all; a lease clause trying to charge it is void, a position the Victorian Court of Appeal upheld in Verraty Pty Ltd v Richmond Football Club Ltd. NSW retail tenants also get a procedural protection that most commercial tenants don't: a written disclosure statement itemising estimated outgoings before the lease is signed, with shopping centre tenants entitled to an annual estimate up front and an audited statement of actual costs afterwards. None of this applies automatically to an office or industrial lease outside the retail leasing regime, where the outgoings clause is whatever the parties negotiate.
Work out the real number before you sign
Before treating a quoted rent as the cost of a space, ask for the landlord's actual outgoings statement from the last full year, not just a forward estimate, and check the lease for any cap, or absence of one, on how much outgoings can increase annually. Confirm whether the figure you've been given is inclusive or exclusive of GST, and use the Property Council of Australia's Method of Measurement to check the floor area two competing quotes are actually priced on, since outgoings recovered on a larger measured area than you'll actually use will inflate your real cost per square metre. Adding base rent, outgoings and GST together, on a like-for-like floor area, is the only way to compare two properties on what they will genuinely cost to occupy.