Hi! I am considering starting a small business from home relating to a craft hobby that is starting to pick up pace. I'm still in the market research stage but I've come up against an issue that could be an instant deal breaker.
I live in a rental property. I reviewed our lease, which doesn't have any clauses preventing a home based business, but I reached out to our landlord and agent as a courtesy to make sure it wasn't going to cause any issues.
Landlord says she's happy for me to do it, thinks it's a great idea as long as I don't register an ABN – which is a bit contradictory. She is under the impression that if I register an ABN then our residential lease will automatically convert to commercial lease and she will have to pay GST on the rent she collects.
That just doesn't sound right to me. To be clear, if I proceed:
- this will not be my primary source of income
- there will be no customers coming to the home
- there is no dedicated space for the business, I have a desk and cabinet set up in the corner of my dining room
- there will be no business signage or advertising on the property
Is she right?
Thanks in advance for any advice.
Graham Doessel - CEO - MyCRA (Specialist Credit Repair) Lawyers (LPH)
Current Rating: 4.65 / 5
I don't know if residential leases are different in Melbourne, but I can't see any residential lease automatically converting to a commercial lease...
But, I'm not a lawyer personally, just own a few law firms :-)
If you are going to run your hobby for profit, then I suggest you look into the ATO rules around hobbies and ABN's and GST etc...
If you were not going to register an ABN (firstly, I'd ask why not) keep in mind that having an ABN is separate to GST...
Many people (rightly or wrongly) run home based hobbies for profit from, well, their homes...nselling on sites like etsy, ebay, amazon etc,
[QUOTE] She is under the impression that if I register an ABN then our residential lease will automatically convert to commercial lease and she will have to pay GST on the rent she collects.
I don't think this is possible.
It was that phrase about the automatic conversion of the lease that really struck me as being unlikely.
For a while, I was just making stuff for friends and family and charging for the cost of materials, but there is definitely a distinction between that and what I am hoping to do in the future, so I would definitely be registering for an ABN (possibly not for GST due to the low turnover at start up phase).
Thanks for reassuring me I'm not crazy ;)
I would have to agree with Graham. I'm no lawyer either but I can't see any requirement for your lease to change to a commercial lease. What you do in your property is your business and is nothing to do with your landlord. Providing of course you're not breaking any laws! And you keep paying your rent.
I live in an apartment building and there are a number of home-based businesses in the building. I'm not a tenant but believe that there are no grounds for your landlord having to pay GST on your rent whether you have an ABN or not.
But as Graham says, check with the ATO and your Accountant before you proceed. Better to get the right advice first than to have a nasty surprise down the track. And good luck!
Director, Bayside Finance Group
M 0418 547337