Apologies in advance if this isn't the correct board - please point me in the right direction if there is a more suitable place to post this.
Short version: Are there tax implications for my landlord if I, as a tenant in a residential property, register a home based business at my home address (ie the landlord's investment property)?
Long version: I have a craft hobby which has slowly been growing. Until now, I've made things for friends and family and just charged for the cost of materials, but through word of mouth I'm getting more and more requests and have also been approached about some small business-to-business orders. So right now I'm going through the process of drafting a business plan and doing some market research before making a final decision about whether or not to move ahead with doing this for profit.
My husband and I are tenants in a residential unit, so in the mean time I reviewed our lease and there is no clause directly or indirectly addressing the issue of running a business from home, but I contacted our agent and landlord, just as a courtesy to make sure there wouldn't be a problem. My biggest concern at that point was whether my home business might affect the owner/landlord's insurance.
The agent responded to say that our landlord thought the home business was a great idea and encouraged me to do it as long as I didn't register an ABN at the home adddress. My understanding is that the ABN requires that the registered address is the primary location of where the business activity is conducted, so that would be my home address. But what was odd was the reason the agent gave: she said that the landlord is under the impression that if I register an ABN for a business at my home address, our residential lease will automatically convert to a commercial lease and the landlord will have to pay GST on the rent she collects from us.
That really doesn't sound right to me for a few reasons:
- I can't imagine any scenario where a lease could "automatically" convert without any consultation or mutual agreement,
- the rent we pay per year is no where near the GST threshold
- the primary use of the home is still overwhelmingly residential. My desk/workstation is literally set up in the corner of my dining room
For added clarity, if I go ahead with this venture, my intention is to sell items online and ship to customers, so there will be no customers coming to the home and no signage or advertising at the propertyI have spoken to an accountant who was happy to tell me that the landlord's understanding is incorrect (citing the same reasons I have listed above), but wasn't keen to provide the advice in writing for the purposes of responding to the agent and landlord. With the prevalence of people selling online via ebay and etsy etc, I thought it would be easy enough to find some information to respond with, but I'm having difficulty finding anything that addresses this or a comparable scenario.
Can any one suggest where I can find or obtain written confirmation of the ATOs position in a situation like this to reassure her that the lease would not convert and she would not be liable for GST.
Or is she actually correct and I am way off?
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8,119 views3 replies
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8,119 views
3 replies