Tax implications for residential Airbnb hosts

There has been a significant increase in Airbnb rentals since it officially commenced in Australia during November 2012. Airbnb is an online platform (website/App) which lets people rent out all or part of their properties to guests.

The Australian Taxation Office (ATO) will be data-matching information and has sophisticated detection models to identify individuals who have provided accommodation services through online platforms.

The ATO will be reviewing the accommodation sharing economy to ensure individuals are correctly declaring income and claiming accurate deductible expenses in their personal income tax returns for the period 1 July 2016 to 30 June 2020.

Therefore, you need to consider the following points when you advertise all or part of your residential house or unit through a sharing economy website/App like Airbnb or similar:

  • keep records of all income earned and declare it in your income tax return
  • keep records of expenses you may be able to claim as deductions
  • don’t need to pay GST on amounts of residential rent you earn.

However, there are different income tax and GST obligations if you are carrying on an enterprise renting out commercial residential premises.

Income tax implications

When you rent out all or part of your residential house or unit, the payments you receive are assessable income and:

  • you must declare the income in your tax return
  • you can claim deductions for associated expenses (you may need to be apportion the expenses for the number of days and the area of the property that was rented out etc.)

Capital Gains Tax (CGT)

When you sell your main residence, the profit it is usually exempt from CGT.

However, if you have used part of the property for income earning activities such as renting it out on Airbnb, you may not be eligible for the full CGT exemption on a main residence depending on your circumstances.

Goods and Services Tax (GST)

GST does not apply to residential rents, so you will not be liable for GST on the rent you charge and can’t claim GST credits for associated costs (even if your turnover exceeds the GST threshold of $75,000).

However, GST applies to the provision of accommodation such as a hotel room, serviced apartment, a bed and breakfast and commercial spaces like office spaces or function rooms.

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