In late December 2021, the AAT found that an individual, who earned income from accepting paying guests in her home, using the AirBnB platform to source bookings, was not carrying on a business and was, therefore, not eligible for JobKeeper payments. Also her reduced receipts were input taxed and didn’t qualify as ‘turnover’ under the ‘decline in turnover’ test.
The facts were these.
- The taxpayer had been accepting AirBnB bookings at her Sunshine Coast home since 2016.
- She experienced a decline in bookings and revenue as a result of the COVID-19 pandemic.
- She claimed she was entitled to JobKeeper payments as a business participant,
However, the ATO contended that she was not carrying on a business, as required by s 7(1) of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (the CERP Rules) [Federal Register of Legislation – F2020L00419].
It also contended that the taxpayer failed the ‘decline in turnover’ test, as her services were the supply of ‘residential premises’ (and not ‘commercial residential premises’) and thus ‘input taxed’ – expressly excluded from the definition of ‘turnover’.
The AAT agreed with the ATO and therefore the applicant was not eligible for JobKeeper payments.
- Although the AAT accepted that there were indicia that the applicant was carrying on a business – such as a profit-making purpose, the repetition and regularity of the bookings and the regularity and intensity of the cleaning and preparation work that had to be carried out every time guests came and went – ultimately all she was doing was taking paying guests into her own private home that she shared with her husband.
- Those guests merely enjoyed “the sort of domestic services one might enjoy as a guest in any well-appointed private home”.
- In effect, she merely repurposed a spare room along with other domestic facilities in that home to make some extra money on the side.
Alternatively (and perhaps more persuasively), the AAT concluded that the applicant would not have satisfied the decline in turnover test as:
- the services she provided were input taxed, and thus the revenue did not form part of her projected GST turnover.
- This followed from the conclusion that the applicant was supplying residential premises and not commercial residential premises.
The Commissioner raised this as an alternative submission. The AAT dealt with this despite saying it did not need to (because of the ‘business’ decision). In my opinion this was wise, as this seems the more secure basis for denying the benefit.
Arguments in favour of it being a business [per AAT’s reasons]
39. As it happens, the following are the strongest indicia that the applicant was undertaking a business:
- the repetition and regularity of the bookings (and the high occupancy rates);
- the regularity and intensity of the cleaning and preparation work that had to be carried out every time guests came and went;
- the focused and deliberate attention that went into making each guest’s stay pleasant, which included the provision of carefully laundered towels and linen and chocolates on the guest’s pillow; and
- the deliberate efforts made to engage with the demands and quirks of the AirBnB platform, which included responding diligently to reviews and engaging in other activities that were designed to elicit positive reviews and earn the title ‘Superhost’.
Arguments against it being a business
42. While there were additional services made available to paying guests, the Commissioner emphasised the applicant was ultimately welcoming paying guests into her home. They entered the property through the front door rather than having separate access to the guest rooms. (While at least two of the rooms appeared to have been dedicated for use by guests, there was a third bedroom that may have been used more flexibly for guests, or for other purposes – but the evidence on this point was ultimately unclear.) The guests’ rooms could be locked from the inside but they were note otherwise lockable. The applicant said she could lock her own bedroom and the study and might do so if she and her husband were not at home, but it is not clear how often they used the locks in question. The fact those guests came via a booking platform which referred to additional services should not obscure the fact the services in question were mostly conventional domestic services. In short: guests in the applicant’s home were treated as (admittedly important) guests in her private home. When they arrived, those guests enjoyed the sort of domestic services one might enjoy as a guest in any well-appointed private home. The guests did not have exclusive occupancy of the space; they shared the domestic space with the host.
Conclusion on ‘carrying on a business’
44. On balance, I am not satisfied the applicant has established she was carrying on a business at the relevant time. My conclusion is necessarily the product of an impressionistic analysis in which indicia point both ways. I accept there are indicia which point to her carrying on a business, but the law on this topic proceeds on the assumption that not every taxpayer who engages in an activity that generates revenue is necessarily carrying on a business. The applicant in this case is ultimately taking paying guests into her own home that she shares with her husband. In doing so, she is merely repurposing a spare room along with other domestic facilities in that home to make some extra money on the side.
Mere ‘hobby’…?
With all this talk of the revenue being derived from ‘just taking guest into her own home’ – a number of questions come into mind.
- would the Commissioner be content to not tax the receipts are the proceeds of a mere hobby’ (he’s happy to do this with so called ‘hobby farms’ where the deductions typically exceed the revenue)?
- Or does he insist that AirBnB receipts are still ‘income’ – albeit passive income (like ‘rent’)?
- How does this stand with ‘BnB’ receipts before the advent of the internet based explosion of such income (AirBnb, Stayz, etc)?
(FFYS and FCT [2021] AATA 4844, AAT, McCabe DP, 24 December 2021.) [LTN 3, 7/1/22]
[Tax Month – January 2022 – Previous 2021] 8.1.22