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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051239630371

Date of advice: 26 June 2017

Ruling

Subject: Am I in Business – short term accommodation.

Question

Are you carrying on a business of providing short term accommodation?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2017

The scheme commences on:

15 September 2015

Relevant facts and circumstances

You acquired a dwelling in Australia in 200X. (The property)

After a period of time you decided to convert the property into a commercial boarding house.

You undertook various suitability projects to convert the property into a commercial boarding house.

An occupancy permit was acquired for the property to be used as a commercial boarding house.

Guests do not have exclusive possession during their occupancy.

You have provided a number of documents that forms part of and should be read in conjunction with this private ruling.

The property has an amount of rooms available for rent.

At least 1 room contains facilities for the disabled including a lift, disability toilet and bathroom.

You do not reside at the premises.

You provide linen, towels and toilet paper.

The rooms are fully furnished.

The premises are registered as a commercial boarding house.

You advertise for prospective boarders.

You are not registered for GST as you have not exceeded the GST turnover threshold.

The boarders are generally charged a weekly rate depending on the individual’s room within the house.

You attend the site regularly to undertake various administrative tasks.

You estimate that you spend approximately 10-20 hours per week at the property.

You pay all the utility costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5,

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the particular facts.

TR 97/11 provides the Commissioners view of the factors used to determine if a taxpayer is in business for tax purposes.

Taxation Determination TD 2006/78 states (paragraph 22) that whether an asset’s main use is to derive rent will depend on the particular circumstances surrounding the derivation of income.

No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business’ is carried on depends on the large or general impression.

If premises are operated as a boarding house, the issue arises as to whether an occupant of part of the premises is a tenant or alternatively only a lodger/boarder with a licence to occupy.

Ultimately, these are questions of fact depending on all the circumstances involved and no one indicator is decisive. The indicators must be considered in combination and as a whole.

Weighing the factors provided in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production and Taxation Ruling IT 2423 Withholding tax: Whether rental income constitutes proceeds of business – permanent establishment – deduction for interest against your circumstances, the Commissioner considers that the main use of the boarding house is business in nature and not to derive rent.

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