Stamp Duty on Rental Business
Legislative Changes
In the 2005/2006 State Budget, the Government announced that rental duty will be phased out between 1 July 2007 and 1 July 2009 (refer to Circular 255).
Refer to the Rate of Stamp Duty section for information on the new rates applicable following the State Budget announcement. Further information in relation to these amendments will be provide closer to their implementation.
Who is affected?
Any person (legal entity) who carries on a rental business that involves a dutiable rental business must be registered and lodge returns. This is irrespective of where the rental business is transacted and whether or not the person is resident, or has a place of business in this state.
Jurisdictional nexus:
Where the goods are to be predominantly used will determine its liability to rental duty in South Australia.
Rental business includes
- Car rental firms that hire out motor vehicles
- Electrical stores that hire out fridges, video recorders, televisions etc.
- Costume houses that hire out fancy dress, formal dress and accessories.
- Video stores.
- Hire-purchase agreements - including equipment financing arrangements
Rental business does not include
- The hiring of houses, flats or on-site caravans - any rental where land is attached.
- Goods hired out with an operator - chauffeur driven car, etc.
- Floor plan financing.
The defining of an "equipment financing arrangement"
- hire purchase agreements; and
- contractual bailments of not less than nine months where the final payment need not be made earlier than eight months after it was entered into.
What is involved?
If you are carrying on a rental business, you must lodge an Application for Registration with RevenueSA. Each registration must submit Returns, which provide details of your rental income. The frequency of your returns are determined by your gross rental income (excluding GST).
In general, an Annual Return can be lodged where rental income, upon which duty is calculated, is not likely to exceed $120,000 per annum. A registered person is required to submit monthly returns where income received, upon which duty is calculated, is likely to exceed $120,000 per annum. There is a legal requirement to lodge a Return even if the income declared is below the allowance and no duty is payable.
Rate of Stamp Duty
- General Rental Business - the rate of stamp duty on this type of rental business is as per general rental income received in a return period less statutory allowance and any allowable servicing cost deductions calculated at the rate applicable when the rental agreement was entered into.
- Equipment Financing Arrangement (Old or New) - the rate of stamp duty on this type of rental business is as per rental income received in a return period (less any allowable servicing cost deductions) calculated at the rate applicable when the Equipment Financing Arrangement was entered into. There is no provision to claim the statutory allowance nor is there provision to deduct servicing costs as a separate item.
Rates applicable are as follows (as per Budget changes 2005/2006)
| General Rental Business Income | ||
|---|---|---|
| Contracts entered into during the period: | Threshold |
Rate |
| Prior to 30 June 2002 | $24,000 |
1.8% |
| 1 July 2002 to 30 June 2003 | $52,000 |
1.8% |
| 1 July 2003 to 30 June 2007 | $72,000 |
1.8% |
| 1 July 2007 to 30 June 2008 | $72,000 |
1.2% |
| 1 July 2008 to 30 June 2009 | $72,000 |
0.6% |
| Contracts entered from 1 July 2009 | Abolished |
|
| Equipment Financing Arrangement | ||
|---|---|---|
| Contracts entered into during the period: | Threshold |
Rate |
| Prior to October 2003 | NIL |
1.8% |
| 1 October 2003 to 30 June 2007 | NIL |
0.75% |
| 1 July 2007 to 30 June 2008 | NIL |
0.5% |
| 1 July 2008 to 30 June 2009 | NIL |
0.25% |
| Contracts entered from 1 July 2009 | Abolished
|
|
GST Implications
As of 1/1/2003 - GST Exclusive. Gross Rental income declared should exclude any GST collected from clients during the relevant return period. GST incurred as part of servicing cost expenses can be included in the calculation of servicing cost deduction.
Prior to 1/1/2003 -GST Inclusive.
Statutory Allowance
All registered rental businesses that receive income as a consequence of 'general rental business' are provided with an allowance of $6,000 per month ($72,000 per annum) under the Act. This means that the first $6,000 of rental income earned per month is not dutiable and can be deducted for the purpose of calculating your stamp duty liability. Please see RevenueSA Circular 242 for more details. No allowance is available for Equipment Financing Arrangement (Old or New).
Servicing Costs
General Rental Business
Servicing costs associated with the repairs and maintenance of goods is deductible from your gross rental income. Examples of allowable servicing costs and those not allowable include:
Allowable servicing costs:
|
Not allowable as servicing costs:
|
In order to establish your servicing cost deduction percentage, you need to work out your total servicing costs as a percentage of your gross rental income. The maximum allowable percentage under the Act is 40%.
By submitting a written request to RevenueSA, a fixed servicing cost may be approved. If approved, a fixed servicing cost can be used for all your Returns. An itemised schedule of servicing costs over a period of time (usually 6 months) must be lodged before a fixed servicing cost percentage can be established. Fixed serving cost percentages are regularly reviewed by RevenueSA.
Equipment Financing Arrangements (“Old and New”)
Servicing costs for Old and New EFA’s are not separately claimable however the amount declared, upon which duty is calculated, can exclude any servicing costs incurred that are separately charged. Non-separately charged amounts are not to be declared; however to do so, approval from the Commissioner is required.
Passing on Duty
Stamp duty is payable by the registered person (or firm). A registered person is prohibited by the Act from passing on stamp duty under a hiring arrangement, except under certain commercial leasing transactions. See RevenueSA Circular 241 and Circular 242 for more details.
This page was last reviewed 14 March, 2007
