Airbnb offers an excellent possibility to rent the free room without a long-term commitment. Simply put, it is a convenient way to rent a vacation home that will remain quiet for most of the year. It is possible that some Airbnb host does not realize the effects and payback from taxes.
Airbnb's tax information in Australia can be hard to find, and as such we will cover some key aspects here.
Additional income means additional taxes must be paid at the end of the year
Caution: Adding a new source of income like Airbnb can be cool, but don’t just spend this money without proper consideration. Making more money means ATO will charge more taxes!
You may want to ask why you should not spend all your resources earned from Airbnb? It is advisable not to because earning extra income means more taxes from the ATO by the end of the year. It is essential to save a little of what you make with Airbnb to enable you to pay ATO at the time of the charge.
Do not save just a few dollars!
During your first year when you might have topped up your earnings with unpaid Airbnb earnings and other kinds of businesses that you engage in, you may need to save up to 30-40% of your new taxable earnings. The total income you earn will determine the amount of tax that will be deducted from other sources of income. The best person to help you forecast / calculate how much you should save for taxes is your tax agent.
“Re-renting” a rented property on Airbnb
According to the Victoria Department of Consumer Affairs, “if you rent your property to someone else, you need the owner's written consent if you want to include it (or part of it) “on Airbnb.
You are offering a short-term subcontract, which requires tenancy agreement in some states when you rent a room through Airbnb. One puzzling aspect of Airbnb is that regulations are still in development, and may differ from state to state. It is best to consider the risks before registering your property or talk to the owner or the real estate agent first to be on the safer side. If you live in an apartment complex, you should also check your rental agreement as well as the body’s corporate policies. Do not try to rent properties on Airbnb without duly informing the appropriate party as things could get out of hand, and you could be in trouble!
CGT Issues
The capital gains tax (CGT) is paid on the sale of a rented house. This can represent a considerable tax burden.
Usually, the CGT is not paid in your family home. However, if you rent your family home on Airbnb, and it so happens that your home is viewed differently by the ATO. You may have to face an ATO tax bill for the CGT if you end up selling the house.
The proceeds you receive from Airbnb usually exceeds the CGT, but this is not always the case. Due to the unpredictable nature of it, it is something you should consider carefully.
Tax Advantages
Renting a room on your existing property generates income and tax benefits.
The Airbnb tax benefits can include parts of
- Internet and telephone costs
- Water, council and energy rates
- Maintenance and repairs
- Depreciation of the value of furniture and equipment
- Interest on your mortgage
This can result in a set of tax deductions for Airbnb hosts.
You will need to follow up and keep a decent record of when the apartment has been rented out to be able to charge correctly, but in the case of a regular Airbnb guest, it is usually worth it.
Pure Record-Keeping Saves You Big Money at the time of Tax
The way you keep records of a regular tenant is the same way you should keep track of your room/apartment.
This process of record keeping will help you claim everything when it comes to Airbnb expense and taxes. You have to keep receipts handy and notes at arm’s length. The important part is that you get used to the habit of keeping records which will serve as proof of your expenses.
In summary, if you want to rent your property or host a room:
- Try to get an understanding of the tax implications that come with being an Airbnb host
- Do not hide and claim less than your income on Airbnb; the ATO can easily track your Airbnb income
- Record receipts for expenses and bills
- To get the most out of your Airbnb tax deductions, always talk to your tax agent (like etax.com.au) about how to claim all your expenses.