Airbnb has provided home owners with a fantastic way to earn additional income by renting out rooms in their property or their entire home. As a result, Airbnb hosts need to carefully consider the tax implications for their properties using these activities.
We will consider some of the tax implications for Airbnb hosts in this article. Most Airbnb hosts only choose to rent out a single property and would not be considered a business. We will not cover hosts with larger scale activities in this article.
Income Tax
Any rent received from Airbnb will generally be considered rental income and will be taxed at your marginal tax rate. However, you are able to deduct expenses relating to generating this rental income in your tax return. These may include items such as:
– Depreciation of furniture
– Utilities
– Mortgage interest
– Repairs and maintenance
– Cleaning
– Property management fees
Expenses solely relating to Airbnb activities may be deducted in full. Otherwise, the expenses will need to be apportioned if there is a mix of Airbnb and personal use. For example, if the furniture in the lounge was used equally by the host and guests, only 50% of the depreciation could be claimed as a tax deduction.
Records of expenses should be retained including calculations used to work out your apportioned expenses.
Like a traditional rental property, if your income is more than your expenses, you will be taxed on the net rental amount. Otherwise, a rental loss will be able to be used to reduce your other income (negatively geared).
Capital Gains
A family home is usually exempt from any capital gains tax on disposal. This exemption may be lost if the homeowner has used their home to produce income such as by renting out their home or rooms on Airbnb. Consequently, Airbnb hosts may lose a portion of the capital gains tax exemption and could be liable for tax on a portion of the capital growth from the time the property is first used to produce income.
Tax Tip: Don’t just spend all your money as pocket money as
Goods and Services Tax
Residential property is generally exempt from GST. You will not be liable for GST on the rent charged. On the flip side, you will not be able to claim back the GST on your Airbnb expenses.
The information contained in this piece is provided for general guidance only and is not intended to be relied upon in relation to your personal circumstances. You should seek advice from a registered tax adviser to discuss your personal circumstances. For any other questions about management of your Airbnb property in the short term or want to shoot us any questions, feel free to contact us here
