Hi,
not sure if I have this question listed in the best area of the forum. I want to know how renting rooms out on a B and B basis would be treated as?
I live in a town which is very popular in the summer for different events and I am sure I could rent out a couple of rooms in my house for a couple of weeks throught the year. Does anyone have any experience in this and am I in the right place to find out.
My expectation is that for calculating tax I would submit income and expenses as usual and work out what proportion of mortgage, electricity etc would be deductible as per any other business. Now that I think it through as I type it, I think this question would be better suited on a business forum.
Anyway if anyone has experience in this area that would be great.
It would be taxable income and yo would lose the main residence CGT exemption.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
So you are thinking a roomshare or 'air B&B' arrangement.
If you are receiving income which you are you will be taxed on it. If you plan to sell the house, it will effect your main residence exemption. Do you fully own the property?
Have a serious think about your insurance and ensure they sign a tenancy/ roomshare agreement, short term stayers in those areas can go either way. Think about damage to your property so consider that in your bond with the tenant. Overall also consider cost v benefit, and the demographic of the individual who will be staying in the property….
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
Well that's opened my eyes to something I didn't yet know too. I didn't know that there was such a thing as CGT exemption on your main residence so thanks for that, good news. Presumably that's as simple as it sounds. If you make a gain on the property you live in, there is nothing to pay on tax on the gain?
It's not something I have put a lot of though into as yet but I simply thought that since I will be buying a 4 bed house (so that family from the Uk can come and stay with us), why not rent the room out whenever I could. If it will become a minefield it may not be worth it for the little amount of time that I may do it but if it looks like a consistent market then it may be something I do a lot. I also have a large market for FIFO workers in my area in WA for Karratha and Port Headland workers, Tom Price etc so that could work too.
"So you are thinking a roomshare or 'air B&B' arrangement" I have no idea what either of those are.
Paterson00 wrote:Well that's opened my eyes to something I didn't yet know too. I didn't know that there was such a thing as CGT exemption on your main residence so thanks for that, good news. Presumably that's as simple as it sounds. If you make a gain on the property you live in, there is nothing to pay on tax on the gain?Unfortunately in the world of tax law, and law in general, nothing is simple.
To get the main residence exemption there are lots of conditions such as:
– individual owner
– only counting one residence (even between spouses- including defacto)
– less than 2 hectares
– no used for business or income producing purposes
– moved in as soon as practical after settlement
etc
etcTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the info. I'll be losing that straight away then since my wife will be running a dog boarding from our house as soon as we buy it. She runs a dog walking business at the moment and she has a lot of requests for boarding which we cant do in our rental. If I have lost that already, I may as well make as much from the property as possible in income so long as the insurances make it viable.
Paterson00 wrote:Thanks for the info. I'll be losing that straight away then since my wife will be running a dog boarding from our house as soon as we buy it. She runs a dog walking business at the moment and she has a lot of requests for boarding which we cant do in our rental. If I have lost that already, I may as well make as much from the property as possible in income so long as the insurances make it viable.Think about some ways to structure this. perhaps you could buy it and rent to her business or a trustee could buy and you could rent from the trust and then claim part of the rent as a busniess expense etc
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
When you get the dog boarding ste up let us know if you are in melbourne!
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
I am new to all of this Terry and to me they seem like the same thing. Of course there will be differences. Would we have more protection if we structured it as a trust buying the house? I know that initially, the entity in which the business is set up under can make differences in protection and liability. Is this falling under the same thing.
We intend to run a few small business's from our home as we progress. One of which would be a boat charter, or rent the boat from us based at home, ie, people pay us $200 or so a day to take a boat from us for the day on a trailer for example. I have already mentioned the B and B or maybe renting to FIFO workers too. Basically I want to generate as much income from the property as we are comfortable with before it starts becoming a pain and giving up too much in the way of privacy.
I have been advised to get in touch with you since this is your field. We hope to buy in about May. When would I need to be considering all of this?
Redwood wrote:When you get the dog boarding ste up let us know if you are in melbourne!I am in Mandurah I'm afraid. I am interested in doing a house swap once I have bought and visiting Melbourne but I think that is about as close as I can get to helping you out. We could come see Melbourne and look after your dog too… Ever fancied Mandurah, home of the Dolphins?
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