Residential landlords do not need an ABN

Canberra, 29 May 2000

The Taxation Commission has now confirmed that no residential landlord will need to apply for an Australian Business Number (ABN) simply upon the basis that they are renting out residential premises from which the tenant also incidentally conducts a business.

This ruling effectively answers the article which appeared in The Sunday Mail several weeks ago suggesting that any tenant that was conducting a home activity business would have to withhold 48.5 cents in the dollar of the rent from the landlord if the landlord did not provide an ABN number. The ATO has indicated, however, that if it can be said that a tenant is actually conducting a fully-fledged business from the residential premises, such as a plumbing business or perhaps a fencing contracting business, where materials are stored, orders are taken, etc; then in those circumstances the landlord may be required to hold an ABN number. If any landlord is in this position, they should contact the ATO and obtain advice as to whether they fall within the guidelines which require registration. Very few will.

Owners of residential rental properties will not need an ABN, Tax Commissioner Michael Carmody said today.

Under the Pay As You Go system, from 1 July 2000, persons conducting an enterprise will need to quote their ABN in supplies to other enterprises to avoid having tax withheld at the highest marginal rate (currently 48.5 per cent). For tax purposes, "enterprise" includes the leasing of property on a regular or continuous basis.

"Clearly, renting out a commercial property falls within the ABN quotation requirements, but some confusion has arisen where a rental agreement is predominantly for residential purposes and there is some business use of those premises- for example, a freelance journalist working from home." Mr Carmody said.

"I want to make it clear that where the basis of the arrangement is a residential rental agreement, owners will not have to quote an ABN to their tenant even if there is some minor business use of the property by the tenant."

"There will also be no requirement for residential rental property owners to quote an ABN to an organisation that is providing residential accommodation for its own employees- for example, through the Defence Force Housing Authority."

"However, residential rental property owners are still required under the new Tax System to check that people who provide any goods, or services in respect of the rental property- for example a plumber unblocking a drain- quote an ABN on their invoice if the value is greater than $50. If they don't then the residential rental property owner should withhold 48.5 per cent of the payment. The property owner does not need their own ABN to do this."

"If a residential rental property owner wants an ABN, they are entitled to one as an enterprise, but they do not require one for PAYG purposes. If you have already been issued with an ABN and do not wish to keep it contact the Tax Office on 132478 to have the number cancelled."