There's a lot of people looking to make some extra cash by renting out a spare room in their house through Airbnb or other accommodation sites. The sharing economy is transforming the market and making it easier for people to get involved, but have you considered the tax consequences that might arise by becoming an Airbnb host?
rent & expenses
Say you have a spare room and decide to offer it for rent via Airbnb. The rent that you receive from a tenant will be treated as assessable income. Similarly, any expenses that you incur which directly relate to the listing will be deductible. For example, if a room is rented, you may have expenses such as linen; booking fees charged by Airbnb; listing expenses; and cleaning costs which can be claimed as deductions.
Other expenses such as mortgage interest, rates, insurance, water and electricity will need to be apportioned. A reasonable way of doing this is to apportion these expenses based on the area being rented compared to the total area of the dwelling.
If common areas are used, for example, if the tenant has access to the kitchen and lounge, then expenses related to these areas can be apportioned based on access.
capital gains tax
Selling your main residence is usually exempt from capital gains tax. If you do decide to rent out part of your house through Airbnb, then be mindful of capital gains tax consequences on the sale of the property. This is because part of the property has been used for income producing activities. The capital gains tax calculation will be based on the floor area used for rental and the gain will be apportioned between a tax free main residence exemption component and a taxable component.
record keeping
Finally, good record keeping is important. From recording income and correctly calculating expenses to floor area calculations and CGT cost base information, all these records are required by the ATO who have identified the sharing economy to be a focus of their audit activities.
want to know more?
If you’re an Airbnb landlord or you're thinking of becoming one, talk to us to make sure that you’re on the right track and correctly recording your income and claiming all available deductions.