# What Is Gross Turnover (GTO) Rent?

If you are venturing into retail and looking to rent a premise in a shopping mall, you are likely to come across an offer from the landlord that looks something like this:

\$20.00 psf/month + 1% OR 11% of Gross Turnover, whichever is higher

The + 1% or 11% of Gross Turnover is commonly referred to as GTO Rent. What this means is that on top of the Base Rent (\$20 per square feet per month in the example above), you will also need to pay rent calculated as a percentage of the sales generated at the premise.

Assume you are a GST-registered business and you are looking to rent a premise that’s 350sf.

If a month’s sales, inclusive of 7% GST,  is \$30,000:

• Your Gross Turnover is \$28,037.38 (\$30,000 ÷ 107%);
• You will have to pay Base Rent of \$7,000 (\$20 x 350sf);
• In addition to the base rent, you will have to pay Turnover Rent of \$280.37 (1% of \$28,037.38);
• Hence, the Gross Rent payable is \$7,280.37 (\$7,000 + \$280.37).

What about the OR 11% of Gross Turnover? This OR GTO kicks in in those months when the Gross Rent as a percentage of Gross Turnover is lower than 11%.

If a month’s sales, inclusive of 7% GST, is \$75,000:

• Your Gross Turnover is \$70,093.46 (\$75,000 ÷ 107%);
• Your Base Rent is \$7,000 (\$20 x 350sf);
• In addition to the base rent, you will have to pay Turnover Rent of \$700.93 (1% of \$70,093.46);
• The Gross Rent payable is \$7,700.93 (\$7,000 + \$280.37).
• However the Gross Rent payable of \$7,700.93 is lower than the OR GTO rent of of \$7,710.28 (\$70,093.46 x 11%).
• Hence, you will need to pay whichever is higher. In this case, you need to pay \$7,710.28 as rent.

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