Short-term rental properties - What you need to know

I am hearing and seeing people with investment properties or subletting rental properties via holiday platforms such as Airbnb considering themselves to be running businesses, and as such, are setting themselves up in business structures and registering for GST.

It is important to note that residential rent has NO GST applicable unless the property is commercial in nature, ie hotel/motel with multiple occupancies etc.

It is also important to note that if you personally own or rent a property, then this is your personal rental income, whether you have a business structure or not.

The ATO has a number of guidances which can help you determine if the ATO considers you to be running a business:

1. You must make a profit - if you are earning rental losses, then you are not considered to be running a business, as the number one reason for running a business is to make a profit.
2. Is management of your rental properties complex, do you turn over and invest in new properties, continuing to increase your rental portfolio etc?
3. Do you run your rental operation like a business - ie do you employ agents to identify new properties to add to your portfolio, do you have a business plan etc?

The ATO considers just compiling your rental income and expenses and providing to your accountant annually to not be in keeping with running a business - you need to be actively working in your rental business, sourcing new properties, dealing with day to day issues etc.

This is a very complex issue and in some instances, a private ruling needs to be obtained from the ATO to determine whether your income is personal or business.

Don't get caught - make sure you are using the correct structure to record your rental income and expenses - this is an area that the ATO is cracking down on and expect audits to be increased in this industry.