Renting out your holiday home to short stay travellers is unlikely to qualify it for the small business capital gains tax exemption when you sell, confirms a recent tribunal decision.
A couple sold a holiday unit they had bought for $500,000 at Point Lookout on North Stradbroke Island in Queensland. The unit had been rented out to tourists for short stays or a week or two.
The tax office ruled that the unit was not part of a small business and was not eligible for small business tax concessions, including a possible CGT tax exemption, when it was sold.
The couple appealed to the Administrative Appeal Tribunal and lost.
The Australian Financial Review reports that senior tribunal panel member Bruce Pascoe said: “There is one property only, owned jointly [by the couple]. This is hardly of the size and scale requiring the ongoing, sustained and repetitive commercial [activities] indicative of a business activity.”
The property failed because it was not used in carrying on a small business and its main use was to derive rent.
An example of where a property is a part of small business, according to a tax office ruling, is a complex of six holiday apartments, advertised and operated like a motel.