TAX TIME – How to declare Airbnb income. What you can deduct.

TAX TIME – How to declare Airbnb income. What you can deduct.

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You are probably wondering what income you have to declare and more importantly what tax deductions can you claim.

For the first time, the ATO is providing guidance on the income generated through the Sharing Economy.

We thought we’d share this interesting information with you. If unsure, make sure you double check with your accountant or directly with the ATO.


I am renting out all or part of my house through the sharing economy

When you rent out all or part of your residential house or unit through a sharing economy website or app you:

  • do NOT need to pay GST on amounts of residential rent you earn
  • need to keep records of all income earned and declare it in your income tax return
  • need to keep records of expenses you can claim as deductions.

    If you are carrying on an enterprise in which you rent out commercial residential premises you will have different GST and income tax obligations.

     

    If I am renting out a room or a whole house or unit do I need to pay GST?

    No. GST does not apply to residential rents, so you are not liable for GST on the rent you charge and you cannot claim any GST credits for associated costs.

    Even if you carry on another GST registered enterprise, for example you are a ride-sourcing driver, you do not need to account for GST from the income earned from renting out a room or a house or unit. This is because GST does not apply to residential rent.

    However, you do have to pay GST if you provide accommodation like a hotel room or serviced apartment, a bed and breakfast, or rent out commercial spaces like a function room or office space. These types of accommodations are subject to GST.

    Do I need to pay income tax on amounts received from renting out a room or whole house or unit?

    Yes. If you rent out all or part of your house or unit, the payments you receive are assessable income. This means:

    • you must declare the income in your tax return
    • you can claim deductions for associated expenses.

    You declare the income, and can claim associated expenses, for the income year as rental income in your income tax return.

    You may also need to pay capital gains tax when you sell the house or unit. Even if the house or unit is your main residence, renting out any part of it usually means losing part of your CGT main residence exemption.

    See also:

     

    What deductions can I claim?

    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 (for example, 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.

    See also:

     

    Claiming deductions when only renting out part of the house

    If you are only renting part of your home, for example a single room, you can only claim expenses related to renting out that part of the house. This means you cannot claim the total amount of the expenses – you need to apportion the expenses.

    As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user), and add that to a reasonable amount based on their access to common areas.

    You can only claim expenses for when the room was available for rent. If you use the room in any capacity, for example for storage or as an office when you do not have guests staying, then you cannot claim deductions for expenses when the room is not occupied.

    You can claim 100% of expenses that are only related to renting out the room to paying guests. For example, you can claim the whole commission or facilitator fee charged by the sharing economy website or app.

    Example: renting out part of your house

    Clementine has a two-bedroom unit with two bathrooms in a popular downtown area. Clementine lives alone and only uses her spare room as an occasional home office, for storage and when she has guests. Clementine mainly uses the ensuite bathroom. The second bathroom is accessible from the main areas and mainly used by visitors. Clementine decides to rent out the spare room on a sharing economy website to earn extra income.

    The unit is 80 square metres in total. The spare room being rented is 10 square metres and when the paying guests come to stay Clementine removes all excess items from the room and does not access the area.

    Clementine also gives the paying guests access to common areas including the second bathroom, the kitchen and living area (including the balcony) which are 40 square metres in total. For the period guests are staying and have access to the common areas, Clementine can claim 50% of associated costs.

    Clementine also offers her guests access to her wi-fi for free.

    Clementine had the room available and occupied 150 days in the year. When she is not renting out the room she uses it as storage and a home office. Clementine has calculated that she can claim 15.33% of her general expenses based on:

    • room occupancy – (10/80 x 150/365) x 100 = 5.13%
    • common areas – ((40/80 x 150/365) x 50%) x 100 = 10.2%.

    Clementine can claim a deduction of 15.33% of her general expenses like electricity, interest on her mortgage, internet expenses, rates and body corporate fees.

    Clementine can claim 100% of the expenses associated solely with renting out the room like the facilitator’s commission or administration fee.

    End of example

    See also:

     

    Claiming deductions when renting out your main residence on an occasional basis

    If you rent out your whole house or unit on an occasional basis via the sharing economy, you can claim the proportion of expenses related to the time when you were not at the house or unit.

    This may apply where you rent out the house or unit when you are away for a period of time, or you vacate the house or unit to allow paying guests to stay.

    In this case the proportion of total expenses you can claim reflect the proportion of the financial year the house or unit was rented out.

    You can claim 100% of any expenses that are only related to renting out the house or unit to paying guests. For example, you can claim the whole commission or facilitator fee charged by the sharing economy provider.

    Example: renting out your main residence on an occasional basis

    John and Mary live in a one-bedroom unit in the city which they list as available for rent on a sharing economy app for paying guests. When John and Mary accept a booking for their unit they go and stay with Mary’s parents.

    Because the unit is John and Mary’s main residence, and they only vacate the place when they have a booking, they can only claim expenses on a proportional basis.

    Last year John and Mary rented out the unit for 100 nights. This means John and Mary can claim 27.93% of expenses (100/365 x 100).

    John and Mary can claim 100% of the expenses associated solely to renting out the unit like the facilitator’s commission or administration fee.

    End of example

     

    Claiming deductions when renting out an investment property

    If you have an investment property that you do not use at all for private purposes and you have it advertised for the whole year as available for rent on one or more sharing economy websites or apps then you can claim 100% of the expenses associated with the property.

    If you have an investment property that you use for personal use, like a holiday home, you claim expenses based on the proportion of the financial year the house or unit is rented out or advertised for rent.

    See also: