In Australian commercial leases, net rent vs gross rent describes who pays the property’s outgoings, and it decides what you actually hand over each month.
Under net rent, you pay a base rent and then cover outgoings such as council rates, insurance and maintenance on top. Under gross rent, you pay a single figure that already includes most of those outgoings.
The label on a listing is only a starting point because the lease wording decides your real cost. Get this wrong, and a cheap-looking rent can become the more expensive choice, so here is how each structure works and what to check before you sign.
What Is the Difference Between Net Rent and Gross Rent?
The core difference between net rent and gross rent is who pays the outgoings. Net rent is the base rent for the premises only, and the tenant pays outgoings such as rates, insurance and building costs separately on top.
Gross rent is a single rent figure that already includes most of those outgoings, so the landlord carries the running costs and builds them into the rent.
Neither label is fixed by law in Australia, and the same word can mean slightly different things from one lease to the next.
What actually matters is the outgoings clause in your lease, not the heading used in a listing or a heads of agreement.
The table below sets out how the two structures usually compare.
| Feature | Gross rent | Net rent |
| What the rent figure includes | Base rent plus most outgoings in one amount | Base rent only |
| Who pays outgoings | Landlord, built into the rent | Tenant, on top of the base rent |
| Budgeting | Easier and more predictable | Variable, depends on actual outgoings |
| Who carries the risk of rising costs | Usually the landlord | Usually the tenant |
| Where it commonly appears | Some offices and simpler tenancies | Many multi-tenant buildings and centres |
In practice, gross rent tends to suit tenants who want a predictable, single monthly figure and are happy to pay a little more for that certainty.
Net rent tends to appear in multi-tenant buildings and centres, where the landlord wants to recover shared running costs from each tenant based on the space they occupy.
Because the money can end up in a similar place either way, the safest approach is to price both offers on a total-cost basis before you decide.
What Does a Tenant Actually Pay Under Net Rent?
Under net rent, a tenant usually pays the base rent, plus outgoings, plus their own running costs, and often GST on top.
The base rent is the headline figure you see advertised, but it is rarely the full cost of occupying the space.
Outgoings are added separately, and they can be charged as a fixed amount, as your share of the building’s actual costs, or as an estimate that is reconciled at the end of each year.
On top of that, you still pay your own operating costs, such as electricity, phone, internet and contents insurance, which sit outside the lease entirely.
What Are Outgoings in a Commercial Lease?
Outgoings are the property’s running costs that a landlord passes on to the tenant under the lease.
Common outgoings include council rates, water and sewerage rates, building insurance, strata or body corporate levies, common area cleaning, security, and repairs and maintenance.
The categories vary from lease to lease, so a net rent that looks cheap can carry heavy outgoings, while another with a higher base rent may include more.
A landlord can generally only recover outgoings that the lease properly describes, which is why a vague clause such as “all costs of running the building” is a warning sign rather than a detail to skim over.
What a landlord can pass on also depends on the lease and the retail leasing law in your state, and some charges, such as management fees, capital costs or land tax, cannot be recovered from retail tenants in certain states.
Does GST Apply to Net Rent and Gross Rent?
GST generally applies to commercial rent, so most tenants pay an extra 10% on top of the rent and any recoverable outgoings.
Where a landlord is registered, or required to be registered, for GST, the Australian Taxation Office confirms they are liable for GST on the rent they charge on commercial premises.
That GST usually applies to both the base rent and the outgoings the tenant reimburses, so it forms part of your total cost under either a net or a gross lease.
It should not be charged twice, though, because GST cannot be added on top of an amount that already includes GST.
If your own business is registered for GST, you may be able to claim that GST back as a credit where the premises are used for your business and you hold a valid tax invoice, but you should still budget for the cash-flow effect and check whether figures in the lease are quoted as inclusive or exclusive of GST.
What Does a Tenant Actually Pay Under Gross Rent?
Under gross rent, a tenant usually pays one combined figure that covers the base rent and most outgoings, which makes budgeting simpler.
The appeal is certainty, because you are less exposed to sudden jumps in rates, insurance, or building costs during the term.
Even so, “gross” rarely means “everything,” so you still need to check what sits outside the rent.
Items such as electricity, after-hours air conditioning, your own insurance, and GST are commonly excluded and billed to you separately.
What Is a Semi-Gross Lease?
A semi-gross lease is a middle option where the rent includes outgoings up to a set base year, and the tenant then pays their share of any increases after that.
For example, if outgoings rise above the level set in the first year of the lease, the tenant covers the difference from that point on.
This shares the risk of rising costs between the parties, which can suit both sides when utility and insurance costs are hard to predict.
As with every rent label, the protection you get depends on how clearly the lease defines the base year and what counts as an increase.
Which Is Cheaper, Net Rent or Gross Rent?
Neither label tells you which lease is cheaper, because the only fair comparison is the total occupancy cost, not the advertised rent.
A low net rent can end up costing more than a higher gross rent once outgoings, GST and your own running costs are added in.
Consider a simple example with two similar premises. Premises A is offered at a gross rent of $84,000 a year. Premises B is offered at a net rent of $70,000 a year, plus estimated outgoings of $18,000 a year.
Premises B looks cheaper on the headline rent, but at $88,000 before GST, it is the dearer option once outgoings are counted.
The gap can widen further if the outgoings at Premises B are only an estimate and the actual figure rises at the annual reconciliation.
This is why it pays to ask for the outgoings estimate in writing, check whether it is capped, and compare both offers on the same total-cost basis over the full term.
Are Net and Gross Rent Regulated Differently in Western Australia?
In Western Australia, the rent labels themselves are not defined by statute, but retail shop leases carry extra protections that affect how outgoings can be charged.
Most retail shop leases in WA are covered by the Commercial Tenancy (Retail Shops) Agreements Act 1985, which the Small Business Development Corporation explains generally applies to premises with a lettable area of 1,000 square metres or less that are used for retail.
The Act reaches shops in a retail shopping centre, premises used mainly for the retail sale of goods, and certain specified businesses, but it excludes some leases, including those over 1,000 square metres and those where the tenant is a publicly listed company or its subsidiary.
Under that Act, a landlord must give the tenant a disclosure statement, a tenant guide, a proposed lease, and an operating expenses budget at least seven days before the lease is entered into.
The Act also regulates how specified operating expenses can be passed on, so a retail tenant should be able to see the outgoings clearly before signing rather than discovering them later.
Under the Act, some costs cannot be recovered from a retail tenant at all, and Western Australian guidance confirms that management fees and capital expenses are not recoverable.
General commercial premises, such as offices, warehouses and factories, usually fall outside that Act, which means the lease wording does most of the work and there are fewer automatic protections.
Other states run their own retail leasing laws with broadly similar disclosure and outgoings rules, and some of them restrict passing certain costs, such as land tax, onto retail tenants.
Because the rules turn on the type of premises and the state it sits in, it is worth confirming which regime applies to your specific lease before you agree to a rent structure.
What Should You Check Before Signing a Net or Gross Lease?
Before signing either a net or gross lease, confirm the full cost of occupying the premises and how that cost can change over time.
The rent label is only the starting point, so the detail in the outgoings, rent review and repair clauses is what really sets your exposure.
The following checks help you compare offers fairly and avoid surprises after you move in:
- Which outgoings are payable, and whether they are listed individually rather than as a vague catch-all
- How outgoings are calculated, whether as a fixed sum, a share of actual costs, or an estimate reconciled each year
- Whether there is a cap on how much outgoings or rent can rise, and how any rent review works
- Whether repairs, maintenance and make good obligations shift major building costs onto you
- Whether the rent and outgoings are quoted inclusive or exclusive of GST
Rent reviews deserve close attention, because a low starting rent can climb quickly under a fixed percentage or market review.
Make good obligations at the end of the lease can also be a large hidden cost, especially if you have spent heavily on your fit-out.
Reading these clauses together, rather than focusing on the headline rent, is the clearest way to judge whether a net or gross lease is the better deal for your business.
Need Help Comparing Net Rent and Gross Rent?
Choosing between net rent vs gross rent comes down to the total cost rather than the label, and an unclear outgoings clause can leave you paying more than you expected.
As commercial lease lawyers in Australia, my law firm reviews, drafts and negotiates commercial and retail leases at fixed fees, so you know your true occupancy cost before you sign.
To have your lease checked or to talk through a net or gross rent offer, contact my law firm today by calling 1300-529-888.
Frequently Asked Questions
What is the difference between net rent and gross rent?
Net rent is the base rent for the premises only, and the tenant pays outgoings such as rates, insurance and maintenance separately on top. Gross rent is a single figure that already includes most outgoings, so the landlord builds those running costs into the rent. The labels are not fixed by law, so the lease wording decides your real cost.
Does gross rent include all outgoings?
Not always, because gross rent usually covers most outgoings but rarely every cost. Items such as electricity, after-hours air conditioning, your own contents insurance and GST are often billed to you separately. Always check the lease to see exactly what the gross figure includes and what you still have to pay on top before you sign anything.
Do you pay GST on net rent and gross rent?
Yes, in most cases, because GST generally applies to commercial rent where the landlord is registered for GST. Tenants usually pay an extra 10% on the base rent and recoverable outgoings. If your business is registered for GST, you may be able to claim that amount back as a credit, so check whether figures are inclusive or exclusive of GST.
Is net rent or gross rent cheaper?
Neither label tells you which is cheaper, because the true comparison is the total occupancy cost. A low net rent can cost more than a higher gross rent once outgoings, GST and your own running costs are added. Ask for outgoings estimates in writing and compare both offers on the same total-cost basis over the full lease term.
What is a semi-gross lease?
A semi-gross lease is a middle option where the rent includes outgoings up to a set base year, and the tenant pays their share of any increases after that. It shares the risk of rising costs between landlord and tenant. The protection you get depends on how clearly the lease defines the base year and what counts as an increase.