Airbnb vs Tax – What You Need to Know

Let’s rent the house out for a bit of extra on the side!

So there are extra rooms that you don’t use and it’s just occurred to you that the extra cash that could come in from renting a room or two on Airbnb outweighs the negatives of having a complete stranger in your home – OK, what do you need to be aware of?

1. The income you receive is definitely taxable – contrary to what you might have heard.

2. Some expenses can be claimed in full – like the cleaning, depreciation on furniture used, Airbnb fees etc.

3. Other expenses (interest, rates, electricity, etc) can be claimed but must be apportioned based on how much of the house has been rented (one or two bedrooms) and how much of the house is to be shared (lounge, kitchen, etc) this is where it can get complex and it is time to get the tape measure out and work out the floor space rented, shared and private.

4. The expenses also need to be apportioned according to the amount of days the extra rooms are genuinely available for rent – as the term suggests, it’s when a visitor can genuinely book and stay. If there are too many exclusions like no kids, pets, Collingwood supporters, etc. then this is not generally available for rent.

5. The biggest possible negative may be the one that sneaks up on you – no, not the Collingwood supporter – the Capital Gains Tax (CGT). CGT is applicable on the small portion of time that the whole home was not your principle place of residence.  This includes each time that you have rented out one of the rooms!  This will be very tricky to calculate if records are not kept and it is up to you to keep track or pay more CGT than necessary on the sale of your home one day.

Alternatively, you might decide to rent out your whole place while you take a job interstate or overseas, or simply take a decent holiday break. Do note:

1. Again, the extra income will be taxable – just like renting it out via a real estate agent long term.

2. Expenses directly relating to the rental period, cleaning, repairs (after the 250 kids + Facebook party gets out of control) and Airbnb fees are deductible.

3. All the other costs of holding the home over the year are partly deductible depending on the period that the home is genuinely available for rent as above.

4. CGT is a bit different when renting out the whole place as opposed to renting out part of it. Basically, as long as you return to the house within 6 years of the first Airbnb stay, you (or your spouse) do not buy another principle place of residence whilst away and there has never been a time when only part of the house was rented while you lived in the rest of it, you probably won’t have a CGT problem later.  However the CGT rules are very complex and the ATO are targeting short term rental areas more and more. In particular, they are targeting properties rented out using Airbnb as there has been a lot of confusion about what is and what is not taxable.

As always, please feel free to contact us here at Paris Financial on 03 8393 1000 if you have any queries regarding Airbnb and holiday rentals. We have specialist experience in this area and are ready to assist.

Ken Burk, Partner, Paris Financial. 

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