Business run from IP

From: Sue J


I will ask my accountant , solicitor , & insurance company but...

my tenants want to run a day care centre from my IP.
My initial reaction is NO WAY but I will check out everything first.I would like to know everyone else's opinion.

I'll let you know what my accountant etc say.

Thanks
SJ
 
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Reply: 1
From: Robert Forward


Hey, if my tenants wanted to start a day care center from my IP I'd seriously consider it. Mainly because I'd tell them that I am going to raise the rent if they do so.

And you can use the following reasons for it.

Higher Insurance
May need to have the property re zoned by council
More wear and tear on the property
The bank may want a high interest rate too, as it is no longer a residential property.

But they are just a few things you may need to consider.

Cheers
Robert
 
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From: William Blake


I agree with the opportunity raised in terms of increasing the rent - the other thing to consider is - do you need to change the lease to a commercial lease?? - does anyone know if this is the case??

If the answer is yes, this means your tenants will be responsible for ongoing maintenance to most fixtures and fittings etc


which could save you considerably

William Blake
 
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Reply: 1.1.1
From: Robert Forward


Hi William

That is very true, it would turn into a commercial lease. Thus also being able to place a longer tenancy contract on the property with set increases in the rent.

Good to see that SJ is going to take this to his accountant. It would be good to hear what he comes back with.

Cheers
Robert
 
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Reply: 1.1.1.1
From: Andrew Hawkins


I think l read somewhere that they will have to deduct 48.5% tax unless you reg for GST.
 
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From: Kristine .


Andrew:

The 48.5% tax is relative to whether or not the landlord has an ABN. If you do not present your ABN a commercial tenant must withhold the 48.5%, send this to the ATO, and you can claim it back on your end of year tax return. Your Australian Business Number is distinct from any GST requirement.

However, no one has to register for GST unless their business income exceeds, or is expected to exceed, $50,000 per annum. Then, the tenant pays GST on the rent (commercial rent is deemed to be the provision of a service: residential rent is not considered in this way) which you, as the receiver of the tax, must forward to the ATO. The tenant can then claim this amount as input credits on their BAS.

There is still a lot of confusion regarding ABN and GST, mainly because these two systems appeared at the same time. However, one is an honesty system (are you declaring all your income) and the other is a tax.

Cheers

Kristine

E & O E
 
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Reply: 2
From: Kristine .


SJ

I ran a large child care centre (with a council permit)from a residential property for five years.

Residential zonings generally provide for ancilliary uses ie services and amenities necessary to support the residential nature of the area.

I would be happy to give you the benefit of my experience - during the five years I renovated and extended twice and had just been granted a further planning permit to extend again when I sold up.

As this is not likely to be of much interest to other forum participants, you are invited to email me direct.

Cheers

Kristine
 
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From: Terry Avery


In my opinion a very bad idea and I am sure your insurance company will not
like the idea.

Who will be responsible for child proofing the house? Things like heaters
have to have substantial guards around them to prevent children touching the
heater. What if any, structural changes will have to be made to accommodate
the centre, what effect will these changes have on the future resale value.
If the business goes bust where will the money come from to restore the
house to its previous condition.

Your liability may be quite high if a child is injured and the operator of
the child care centre blames it on lack of maintenance by you, never mind
they never told you about the loose step, faulty wiring, etc.

If they are running a business then GST may be involved and you may need an
ABN, check with your accountant.

Definitely talk to your solicitor.
 
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