Ever since Airbnb started back in 2008, it has become common for people to put their property on websites like Airbnb and Stayz to earn a bit of extra income. While you are happy with the flexibility of how you can utilise the modern technology to earn extra money from your property, have you ever wondered what the tax ramifications are of receiving this income and thought about consulting a tax agent?
Generally speaking, renting out your property on Airbnb or Stayz is similar to the traditional arrangement you would have with your lease agent. So the common tax issues apply. Take Airbnb, for example. The critical tax issues you need to consider are:
- In general, rental income derived from Airbnb will be assessable as ordinary income
- You can claim a full deduction for costs directly related to providing Airbnb service (e.g. Airbnb host service fees)
- You can claim a portion of other general property costs, apportioned based on the number of days the property is rented and the area rented out. The other general property costs are council rates, water rates, strata levy, interest on mortgage, electricity and gas, insurance, capital allowance, capital work deductions, etc.
Generally speaking, the supply of Airbnb services won’t be a supply of commercial residential premises. Rather, the rent is derived from a supply of residential premises, which is an input-taxed supply. As such, Airbnb hosts are not required to register for GST. No GST is payable on the rent, and no input tax credits can be claimed on the expenses related to renting out the property.
Capital gains tax
This is a rather complex area. As each person’s circumstances are different. Various factors must be considered before we can advise if there are any capital gains tax implications and how much it will be. A couple of examples of the factors you need to consider are:
- Is the property your primary residence?
- When the property was purchased?
- Did you live away from the property when it was on Airbnb?
- How long you lived away from your property when it was on Airbnb?
- Did you rent out the whole property or just part of it?
While CGT tends to apply to the periods that the property was rented and the portions of the property that were rented, each person’s circumstances are different, so please discuss with us to work out your specific CGT ramifications.
Other things to consider are:
- Record keeping: You must keep a proper record according to ATO requirements, especially for capital gains tax purposes. There are certain documents ATO requires taxpayers to keep until such time they sell the property and include the capital gain in return.
- ATO data matching: ATO now utilises many auto data matching tools regarding internet transactions, OSR records, etc. They match data with organisations like Airbnb and Stayz, so if you rent your property on these sites, expect the ATO to know about it.
- Tax residency issues: the tax residency status will significantly impact what periods the property can be claimed as a primary residence for tax purposes and any apportionment of the period.
- Land tax principal place of residence exemption: Land tax is a state tax applied at a rate of 1.6% of the unimproved land value of the property above the land value threshold of $549,000 (in NSW). It does not apply to your principal place of residence. Again, this exemption for the principal residence place depends on your circumstances, so please discuss it with us.
- Sub-letting the property under a standard lease agreement.
It is important to remember that every single person’s circumstances are different. While the above is a general summary of the tax issues that every Airbnb or Stayz host may need to consider, we strongly recommend you discuss the above with us concerning your specific circumstances.
Kreston Stanley Williamson Team
*Correct as of September 2017
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.