Australia has always been a popular travel destination. Many holiday makers look for short-term affordable accommodation. Therefore, more and more Australians are now renting out all, or part of their residential property through a sharing economy website or app, like Airbnb and Stayz. While renting through Airbnb and Stayz Airbnb is a great source of additional income there are certain tax implications you must be aware of as a result.
Income tax
If you rent our all or part of your house of unit, the payments you receive are assessable income. This means you must declare the income in your tax return; even though, it could be sporadic or a one-off transaction. On the other hand, you as the host, are entitled to tax deductions for expenses incurred in deriving that rental income.
The types of expenses that you can claim for renting out all or part of your house or unit using a sharing economy website or app are the same as if you had a rental property.
Common expenses you can claim include:
- fees or commission charged by the facilitator or administrator
- council rates
- interest on a loan for the property
- electricity and gas
- property insurance
- cleaning and maintenance costs (products used or hiring a commercial cleaner).
Whether all or part of the expense can be claimed will depend on:
- the proportion of the year you rent out the house or property
- the portion of the property you have rented out (eg. a room or the whole property)
- whether you use the home or part of the house for personal use when it is not rented out.
Capital Gains Tax (CGT)
When you decide to sell you property, profit from the sale of your main residence is usually exempt from CGT. However, if you use the main residence to earn income, for example by renting out a room on a sharing economy platform, you are no longer eligible for the full CGT exemption on a main residence. You will lose a proportion of your main residence exemption based on the proportion of your floor area rented out, and the length of time it was rented. There are some circumstances in which you will not lose the CGT main residence exemption, for example where you move completely out of your main residence to live in another home for a period of time.
Record keeping
Regardless of how much you earn you must keep records of income and expenses so that you can keep track of your activities and assist with tax obligations when they arise.
Keeping records of every transaction, event or circumstance during your total ownership period will help you work out your capital gain or capital loss correctly and ensure you don’t pay more Capital Gains Tax (CGT) than necessary.
ATO data-matching programs
The Australian Taxation Office (ATO) collects information from a wide range of third-party sources, both public and private, with more than 600 million transactions reported to the ATO annually. An example of third-party source includes sharing economy platforms, like Airbnb and Stayz.
If you are planning to become an Airbnb or Stayz host contact one of our Tax Accountants on (02) 9223 9166 or submit an online enquiry form to discuss whether the venture would be worth it in the long run.
