The rise of Airbnb and similar platforms has transformed property rental in Australia, creating new income opportunities for property owners. It is very important to understand the tax implications on these incomes.
Tax on rental income
All income generated from short-term rentals, including Airbnb, must be reported in the tax return as rental income.
You can claim all the property expenses including the following:
- All the fees or commissions charged by the platform facilitator or administrator (examples include Airbnb or Stayz)
- Interest on any loans you took for the property
- Electricity and gas consumption
- Property insurance premium
- Depreciation on furniture and other assets provided to the tenants.
- Ongoing repairs and maintenance costs for the area being rented
- Ongoing cleaning cost for the area being rented
- Costs associated with listing the property
The portion of these expenses claimable
When part of your home is used for short-term rental, you can claim only the portion of the property expenses that are attributable to the rented space.
How to apportion in different scenarios:
Whole Property rented
100% of the property expenses were deductible.
Whole Property rented for part of the year
The claimable percentage is equal to the number of days rented divided by the number of days in the financial year
For example, if the property is rented during the FY 2024 for 200 days. The percentage of deductible expenses will be 200 days / 366 days. It will be 55%
Part of house rented for the whole year
The claimable percentage is equal to the sq meter area of the exclusive let area of the house plus a reasonable portion of the shared area divided by the Sq meter area of the house.
For example: if you rent out a 10m² room in a 100m² house and have a 20m² shared living space, the claimable percentage will be:
Exclusively rented area + (Shared Area × Usage Percentage)
Claimable Area =10m² + (20m²×50%)
Claimable area = 20m²
Claimable percentage = Claimable area / total area
= 20 / 100 = 20%
Part of Home rented during part of the year
In this situation, you need to multiply the total expenses with the days ratio and the sq meter ratio to arrive at the percentage.
Percentage of claimable expenses = [size of the area rented + (shared area X percentage of usage] ÷ total size of house) x (number of days rented ÷ total days in the year) x 100
Capital gain Tax
When you provide the portion of your house on a rental basis, it may be short-term or rented for only a certain portion of your house; it will be considered as rental property. In the year the property is sold, you are required to pay the tax on the capital gain you have earned for the portion of the property you have rented. If you are claiming the main residence exemption, you need to calculate the exemption based on a portion of the property rented and the period for which it is rented. In such a scenario, you will be eligible for part exemption. You may calculate the portion of your property that is exempt from CGT with the help of the ATO’s capital gains tax property exemption tool.
What about GST?
GST is not applicable for residential property rent. Hence Airbnb hosts don’t have to pay GST on the rental income. This is the case even if the turnover from renting exceeds the GST threshold of $75,000.
On the other hand, you cannot claim GST credits for any expenses for the property
Most importantly, Never hide your Airbnb/other short-term rental income
In recent years, the ATO has become more strict about Airbnb rental properties. They’ve undertaken an extensive program to identify taxpayers earning income from short-term rentals like Airbnb. If you don’t report these, you will be safe only until ATO finds out.
