AIRBNB: TAX MUST-KNOWS BEFORE YOU LET STRANGERS IN YOUR HOME

Previously reserved for your friend that “accidentally” stayed the night or that long-lost relative you’re not sure is actually related to you, couch surfing has now become trendy. Indeed, the sharing economy is booming and growing quickly with services such as Uber and AirBnb quickly becoming part of our everyday life. Services such as these, and others utilise ordinary citizens’ homes and cars and turn them into mini-hostels – granting these sharp owners additional income whilst granting travellers monetary savings and “live in” experience.

Whilst an attractive proposition for those who would like to turn their home into a hotel by renting out some rooms or the entire homes, it hasn’t taken long for the ATO (Australian Taxation Office) to catch up to these budding entrepreneurs and if you’re not careful, you may actually end up worse off down the track.

If you are considering renting your property out or already are, here are some must knows for any would-be landlord.

  • It’s the Australian Tax Office’s view that the tax law applies in the same way to income received in this way as it does to a standard rental arrangement through a real estate agent. That is, the amounts received from the customers must generally be declared as income.
  • Deductions relating to making the room/property available can also be claimed, such as all or part of the interest on a mortgage, insurance, council water and rates etc. Note that if the room/property is let out at less than commercial rates, deductions may be capped by the ATO to the amount of rental income received.
  • Likewise, the GST rules apply in the same way as conventional residential property. Renting out a residential property is an input taxed supply, so no GST is charged on the rent, and no GST credits can be claimed on any associated expenses in making the room/property available for rent (e.g. electricity).
  • This means that the person, persons or entity holding the residential rental property are not required to be GST-registered. Non-reportable style tax codes could thus be used for all income and expenses, as there will be no underlying GST reporting obligations.

For more tax advice concerning Airbnb, here’s a more detailed Fact Sheet  or alternatively seek professional advice from an accountant or tax consultant. If you do need help structuring your assets or are looking to sell or buy a home, please free to contact us to see if we can assist you with any related matter.

The Sharing Economy – Fact Sheet

(Thanks to Josh McMullen – PT Partners for the details provided for this article)