Tuesday, 8 April 2014

Holiday Rentals - DID YOU KNOW

Holiday Rentals - from www.bantacs.com.au

If you own a unit or a house that you rent out as short term accommodation it is still considered a residential rental property. It would be different if you controlled the whole block i.e. a motel like organisation.
As a residential rental property you are not entitled to charge GST or claim GST input credits on expenses associated with the property or its purchase. You are entitled to hold an ABN but unless you have some other form of income you are not required to register for GST. It is important to note that if you are not registered for GST you must not provide tax invoices. Your invoices must not be described as tax invoices and they should not state or imply that GST has been charged. The second item on this page makes it clear that you must not provide a tax invoice if you are not registered for GST http://www.ato.gov.au/Business/Bus/GST-for-small-business/?page=5
Be careful if you let your holiday rental out through an agent. You need to check that they understand this and are not issuing tax invoices on your behalf. As they are merely your agent you could be liable for any GST they imply has been charged and rightly so because if the traveller is on business they will be claiming this GST back.
Short term accommodation may not always be for private holidays, it may be used by someone travelling for business and they may want a tax invoice thinking they will be entitled to the GST back. You need to point out that you are not registered for GST so cannot issue a tax invoice, maybe refer them to the above link.
The trap for your business tenants is, that as part of an attempt to control the cash economy the government requires all businesses to obtain an ABN from anyone they pay or withhold 47% in tax from the payment. Refer http://www.ato.gov.au/General/Contractors/In-detail/FAQs/No-ABN-withholding---questions-and- answers/?page=3#2__If_I_buy_supplies_or_services_from_a_business_that_does_not_quote_an_ABN__w hat_do_I_have_to_do_
Accordingly, if you own a holiday rental, it may be better if you apply for an ABN but not register for GST. Give them the ABN and avoid an argument.
Technically this 47% withholding rule does not apply to input taxed supplies so you may be able to persuade them not to withhold 47% by pointing out you do not own the whole block, you are not a business, just an investor so it is an input taxed supply. The last column on the first page of this booklet points out that withholding does not apply when the supply is input taxed http://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/BUS38509n3346_5_2012.pdf 

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