Expert Tips To Make You Understand Taxes On Air BnB
Generally, properties rented out on Airbnb get taxed in much the same way as investment properties, i.e., rent received by the owner is assessable as rental income, even though you may rent through Airbnb or Stayz platform. But are there other Airbnb tax deductions you can claim?
In simpler terms, as long as you don’t rent out the property to multiple or unrelated tenants, it is treated no differently than a traditional rental property.
What deductions can you claim for an Airbnb property?
You can claim Airbnb tax deductions for expenses incurred on running and maintaining the Airbnb property in the same way as a traditional investment property.
Some standard deductions include:
- Cleaning costs for the rented spaces
- Repairs and maintenance
- Food and meals for Airbnb guests
- Airbnb service fees and commission
- Listing and property management costs
- Interest on your loan
- Council rates
- Utilities and insurance costs
- Professional photography for the listing
When do you rent part of the house on Air BnB?
If you are renting out only part of your home, then you can claim pro-rata deductions for the part of the home rented out.
ATO recommends that you claim expenses based on the floor area solely occupied by the renter plus pro-rata expenses for the renter’s access to common areas.
If you only rent your home out occasionally, then a time-based apportionment should be undertaken for expenses relating to the property in general.
Tip: Be aware of Capital Gain when listing the family home on Air BnB
Any capital gain made on your family home is exempt from tax, but only on the proviso that you do not use your family home to earn income.
So when you rent out your family home on Airbnb, the capital gain exemption is proportionally reduced.
In other words, you will no longer be able to claim the total exemption on the capital gain when you sell.
As a result, any profits made when selling your Airbnb will attract Capital Gains Tax (CGT). So speak to your accountant to get some tax planning advice if you intend to rent your family home out on Airbnb.
Tip – Consider if the property is genuinely available for rent.
In recent years, the ATO has begun to target properties in popular holiday destinations to ensure that any deductions claimed for these properties are appropriate.
ATO suspects some of these properties are holiday homes used by the owners, their families, and friends and not genuine rental properties.
Read our blog here to understand how ATO verifies if the holiday home is genuinely available for rent.
GST on Airbnb income?
When it comes to Airbnb bookings, you should apply the standard rules for residential rental arrangements to determine the GST treatment. The fact that you are renting out your property through Airbnb is not relevant.
As Air BnB is usually a residential premise, there is no GST. The residentially rent usually is input-taxed, which means you cannot also claim GST on any expenses relating to the AirBnB activity.
Tip: Be careful if you rent a Boarding House or Motel
The main exception to this no GST rule is if the property is run as a commercial premise and is rented to multiple unrelated occupants. It will be similar to a hotel, motel, serviced apartments, and bed and breakfast operations. GST will be applicable in such cases.
If you want to talk through your options with an expert, call Nitin and the team at 0407 027 593.
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