Tax Consequences of Airbnb
As an Airbnb host, the income received from renting your property must be declared as assessable rental income. It is important to keep accurate records of the Airbnb income as the ATO can track the income easily. If you rent your property from someone else you may also be required to have written consent from the landlord and a tenancy agreement depending on your residing state.
You might also be eligible for deductions over the associated expenses depending on the number of days the property was rented out during the year and whether you use the property for personal use when it isn’t rented out. If the expenses are directly associated with the rented area they are fully deductible while expenses in relation to shared areas require apportionment. If capital works take place in relation to the property the hosts may not be able to claim a deduction if they are also using the property for private accommodation. As Goods and Services Tax doesn’t apply to residential rents you can’t also claim GST credits for associate costs.
If there is negative gearing on the rental income the hosts are eligible for a reduced taxable income. If the ATO reviews the rental arrangement in this instance and determines a non-commercial rate of rent was being charged the rental deduction could be limited to the extent that it exceeds the amount of rental income received.
Hosts may also have to pay Pay As You Go Instalments (PAYG) to the ATO if you report $4,000 or more investment income in the latest tax return.
The CGT main residence exemption will also be affected as a result of renting out all or part of your house or unit unless it was purchased pre-CGT.
Even though the Airbnb system may have its obvious advantages there are also hidden costs that will sting you in the long run. Thus, it is important to take financial advice before entering the Airbnb system.