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How does listing my home on Airbnb affect my tax?

How does listing my home on Airbnb affect my tax?Australia’s growing “sharing” economy provides many opportunities to make extra income. However, this will generally give rise to additional tax obligations, and accommodation sharing sites like Airbnb are no exception.

Whether you rent out your whole house or just a room, make sure you understand how this “side job” will affect your tax.

Millions of Australians are now using the sharing economy to earn some extra money on the side. Thanks to smartphones and user-friendly app technology, people young and old are using peer-to-peer digital platforms to access sharing services like ride sharing, accommodation sharing, “odd jobs” networks and even pet minding.

The government is concerned that some Australians who receive income from sharing platforms may not be paying the right amount of tax – simply because they are unaware of their tax obligations.

While the government is currently thinking about introducing a compulsory reporting system that would require sharing platform operators to report all transactions to the ATO, for the time being taxpayers must self-report any amounts they earn.

In this instalment of our ongoing series on the sharing economy, we focus on your tax obligations when earning money from a short-term residential accommodation sharing platform such as Airbnb or Stayz.

Do I have to pay tax on these amounts?

The income you earn from accommodation sharing platforms is assessable income that you must declare in your tax return. The ATO does not consider this to be “hobby” income, even if you only share your property occasionally.

You can claim deductions for relevant expenses you incur, such as:

  • fees or commissions charged by the digital platform;
  • interest payments you make on a loan to purchase the property;
  • utilities like gas and electricity;
  • council rates;
  • insurance premiums; and
  • professional cleaning costs.

However, in many cases you will only be able to claim part of an expense. Expenses that are purely related to renting the property (eg platform fees) are entirely deductible, but you will generally need to apportion an expense where:

  • the expense also relates to a private or personal use;
  • the property is rented out, or is available to rent, for only part of the year; or
  • you only rent out a room, rather than the whole property.

It is a good idea to get tax advice on your deductions to ensure you are calculating your claims correctly. You also need to keep thorough records so that you can substantiate your assessable income and deductions.

Goods and services tax

Goods and services tax (GST) in the sharing economy can be confusing. The good news is that for residential accommodation, GST does not apply. This means rental payments you earn are not subject to GST, even if you also earn income from another type of sharing platform where you are required to account for GST (eg ride sharing, such as Uber). However, it also means you cannot claim GST credits for the GST components of your expenses.

Capital gains tax

Usually, when a taxpayer sells their main residence, they are exempt from paying any capital gains tax (CGT). However, using your residence to produce assessable income – including renting it out through the sharing economy – means you may only be entitled to a partial exemption from CGT. The size of your exemption will depend on how long you rented out your home and the floor space that this rental activity relates to. Generally, the more often you rent out the property and the larger the proportion of floor space that is rented out, the more CGT you will have to pay.

Unsure about your tax position?

As with all rental properties, earning money through accommodation sharing sites requires careful record-keeping and documentary proof. Talk to us today to make sure you are claiming the full range of available deductions or to discuss how your main residence might be affected for CGT purposes.