Hi All,
I run a small business and recently discontinued an expensive commercial lease to run the small business from home but not sure what my leasing options and implications are. I have dedicated a room to running the business and do not use this room for any residential purposes. Can anyone assist with the following quesions and any other information that may be important?
1. Can I charge the company rent for the office space utilised?
2. I am currently leasing a storage centre to house equipment. Can I charge the company rent for storage of this equipment within the garage?
3. As an individual, do I need to charge the company GST on the rent? If so, how is this setup and paid to the ATO?
4. Is there any way to avoid paying CGT on the property when it is sold? If not, how is the CGT calculated?
5. The room I am currently using is a little small, although I am making do with what I have got currently. Ideally I would like to build an extension off the house to house the business. Can the business pick up the expense to house the business and if so, what are the tax implications of doing so?Thank you in advance. Any comments or advice is greatly appreciated.
Sorry, I should have mentioned. My wife and I do own the property we live in and it is our principal place of residence that we share with the business.
maust wrote:Hi All,
I run a small business and recently discontinued an expensive commercial lease to run the small business from home but not sure what my leasing options and implications are. I have dedicated a room to running the business and do not use this room for any residential purposes. Can anyone assist with the following quesions and any other information that may be important?
1. Can I charge the company rent for the office space utilised?
2. I am currently leasing a storage centre to house equipment. Can I charge the company rent for storage of this equipment within the garage?
3. As an individual, do I need to charge the company GST on the rent? If so, how is this setup and paid to the ATO?
4. Is there any way to avoid paying CGT on the property when it is sold? If not, how is the CGT calculated?
5. The room I am currently using is a little small, although I am making do with what I have got currently. Ideally I would like to build an extension off the house to house the business. Can the business pick up the expense to house the business and if so, what are the tax implications of doing so?Thank you in advance. Any comments or advice is greatly appreciated.
1. Yes, you can, it will be an expense in the company's accounts, but you (and your wife, if jointly owned) will need to declare the income in your personal tax returns.
2.Yes, thje same principles apply as question 1.
3. No, as I'm assuming the rent will be less than $75,000 a year. Under $75k, you, as the lessor, would not need to register for GST.
4.If you charge rent, you would be up for CGT, asuming you bought the property after 21 September 1985. The capital gain would be the selling price less the market value at time of first rent received, by percentage of floor area rented out..
eg. Sold for $500,000, market value of $400,000, Floor area = 10%.
Capital gain would be $10,000, taxed at your marginal rate of tax.
Thanks Dan42, I appreciate your prompt response and information provided within. Question 5 was probably a little confusing. To make it a little clearer, it should read;
If I was to build an extension onto the existing house, can the business pay for this as an office extension/refurbishment as long as the business operates from the new extension? Apart from the CGT you have already outlined, would there be any further tax implications if the company did pay for the extension?
Thanks again for your responses.
Possibly a deemed dividend or a taxable fringe benefit
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