claim Airbnb income as business income

I register airbnb host using my own name and personal bank info without thinking too much.

I have a company as well. Looking back now, I think it make more sense to put in business income. I am in 38% tax bracket BTW.

Is it possible to claim those as business income even I used personal bank account to receive payment .I managed airbnb myself , used a airbnb management company . Both paid to my personal account.

Anyone know what info airbnb and those management company will report to ATO . Is my approach acceptable?

Thanks !

 

Who owns the property?

 

It's almost like you're saying that the company has to operate the airbnb business in order to have the income attributed to it, and that you can't just attribute income to the entity that you think results in the lowest tax bill.

 

Thanks . My wife and I own this company. I am sole director.

 

Who owns the property you are renting out via airbnb?

 

But who owns the property - you or your company. They are different legal and tax entities.

If you own the property then you would be the one receiving the income.

If the company owns the property then it should receive the income.

 

Yep, I was going down the route that Mark went down. How do you get the money into the company?

 

Ok, my wife and I own the house.

If I understand correctly, the income goes to the owner of property which is my wife and I. I can't say since we own the company this can be taken as company income.

 

You would have to lease to the company which can sublease to the tenant.

but if the reason for doing this is to divert income to the company then it is likely that the ATO will use their powers to limit deductions.

 

I am not a tax agent so this is all a grain of salt. I would expect that you would split the income with your wife as she is part owner without any issues. You could try some fancy agreements to transfer the income to the company but you would still have to receive something of value in order to make the agreement valid. Contracts require "consideration" for both parties. I suspect the ato would disregard such agreements unless they were on commercial terms..

 

Only the owner/s of the property will report their respective share of income and expenses in the same % as legal ownership of the property. The sole exception is a property BUSINESS which is very complex and difficult to meet those tests. eg Substantial property ownership (ATO uses example of 30 properties in some rulings)

 

The ATO's recent guidance in this area (refer to TR 2019/1) suggests that it is easier to show that a company carries on a business compared with individuals or trusts. The ruling suggests that if a company is operated with the expectation and genuine prospect of making a profit and this is done in a commercial manner then it will often be treated as carrying on a business, even if it only earns rent.

 

That view in that ruling does have some concerns to me. Para 30 seems to understate the obvious when it states

Where a company's activities have a significant commercial nature or purpose and are conducted in a commercially viable manner, they are likely to amount to the carrying on of a business

Eg I have a smsf. It owns 4 short stay units all very well positive geared. And it is operated in a systematic like manner, but is not a business. Its an investment. Yes it produces positive income. Does that make a smsf non-complying as it operates a business ? I dont believe so as a significant commercial nature is lacking.

I believe the ATO view is based on the need for individuals to have a reliance on the income from property rather than other sources. Where a company cant typically satisfy that. However I have doubt that this means a company produceds busness income as a consequence. It needs to have significant substance.

There is also a concern from that ruling. If Fred and Mary have six airbnb properties and one is in a company. They did this for the land tax and tax rate benefits. Does that mean its all business income or just the company ? In which case the business includes the individuals and the company or is that ruling specific to a company alone as it reads ?

 

I believe the position for a company has always been different to a trust or individual.

So have the courts

"'Their Lordships would not endorse the view that every isolated act of a kind that is authorised by its memorandum if done by a company necessarily constitutes the carrying on of a business.'

He later concluded however:

'In the case of a private individual it may well be that the mere receipt of rents from property that he owns raises no presumption that he is carrying on a business. In contrast, in their Lordships' view, in the case of a company incorporated for the purpose of making profits for its shareholders any gainful use to which it puts any of its assets prima facie amounts to the carrying on of a business. Where the gainful use to which a company's property is put is letting it out for rent, their Lordships do not find it easy to envisage circumstances that are likely to arise in practice which would displace the prima facie inference that in doing so it was carrying on a business.'

 

A company (and perhaps a partnership) are typically formed and serve the purpose of an activity that produces income (otherwise its member capital would waste). I agree with the above. But that premise is also why I have concerns. Profit making and a business are not necessary the same. What "signiifcant activity" means for Airbnb etc in a company should probably be supported by a binding private ruling or confident tax advice.