Tax Implications of Airbnb Income in Australia

Do you need to pay tax on airbnb income in Australia?

The answer is: Yes, you must pay tax on Airbnb income in Australia. Income earned. Using your home to generate more income is great, but you may be wondering – do you pay tax on Airbnb income in Australia?

The answer is yes, you must pay tax on Airbnb income in Australia. Income earned using short term property rental platforms such as Airbnb or Stayz must be declared to the Australian Tax Office (ATO) as income. In this blog, Stellar Accounts CPA Debbie Hoffman explains four essential things you need to know when it comes to Airbnb tax implications. If you have any questions, feel free to reach out to us here. 

There’s no doubt that taking part in the ‘shared economy’ is a great way to earn some extra dollars, and renting out your holiday home or even a spare room in your house is becoming a very popular extra income stream. But like all income streams, it will be considered taxable income by the Australian Taxation Office (ATO). There will be costs and benefits come tax time and they might take you by surprise if you’re not ready for them.

When you earn rental money no matter if it is privately rented or rented through AirBNB, the ATO will consider that taxable income which will raise your total taxable income at the end of the year. If you’re not careful and aren’t aware of how you manage that income stream, you may have to pay more tax.

How much money should you set aside?

The amount you report on your taxable income is your gross income. Your declarable fees from AirBNB will be larger than what you actually receive in your account. The payments you receive from your guests before refunds or service fees are deducted, will need to be calculated. The difference will be made up in taxable deductions you can claim.

Be aware you might need to set aside extra tax of around 20 to 49 percent depending on your current earnings from other sources such as your wages during the year. The additional income may put you in another tax bracket. Your tax agent will be able to advise the correct amount you should be aware of setting aside.

Tax Implications of Running an Airbnb

Any income earned from short term property rentals must be declared

Always declare income generated via short term rentals such as Airbnb on your tax return.

You may be surprised to learn that the ATO has many data matching processes and receives income information streamed directly from many holiday providers like Airbnb and Stayz.

So, if you do not report your income and you are identified via data matching processes, you could be fined and penalised for failing to report this income to the ATO.

Airbnb isn’t classed as business income by the ATO, but you should treat your record keeping like one!


Tax and Airbnb management

While the ATO doesn’t class monies earned via Airbnb (or similar) as a business, it pays to have business-like systems in place for your record keeping.

We strongly recommend:

  • Ensuring that you keep records of all income and associated expenses as you go throughout the year.
  • Putting money aside to meet possible tax implications (and avoid being caught out at tax time).
  • Obtaining landlord permission if subletting or leasing a room on a short-term basis.
  • Being aware of Capital Gains Tax issues if you rent a room in a home that you own.
  • GST and Airbnb rent
  • GST does NOT apply to residential rent. This means that you cannot claim GST on expenses related to generated rent income.

But the rules are different if you provide accommodation in commercial residential premises, such as a hotel room, serviced apartment or a bed and breakfast.

Tax deductions you can claim for an Airbnb

If you run an Airbnb, you can claim certain deductions on your tax return. These include:

  • Commercial cleaning of the rented area
  • Repairs and maintenance
  • Food, such as breakfast provisions made available to the guest
  • Professional photography for the listing
  • Service fees and commissions charged by Airbnb
  • Internet, phone and cable TV costs

RENTAL INCOME AND YOUR TAX RETURN

The income that you get from your Airbnb rent will normally be deemed assessable, given that the property is advertised to the public online. The ATO may attempt to argue you’re not charging a commercial rent, particularly if you’re making a loss on your Airbnb venture.

YOU ARE ENTITLED TO CLAIM TAX DEDUCTIONS

You can claim tax deductions for all expenses which are incurred in deriving your rental income. Typically, where the entire property is rented out, all of the costs involved in running the property will be deductible. Where you rent out part of the property you’re living in, some degree of apportionment is needed. If you’re a landlord for a rental property with assessable income, you may be entitled to tax deductions for expenses incurred. These expenses fall into three categories:

  • Expenses directly associated with the rented area can be deducted in full
  • Expenses related to shared areas need to be apportioned
  • Expenses related to the host’s private area only cannot be deducted.
  • Expenses that may be deductible in full include:
  • Depreciation of furniture used in the rented room
  • Commercial cleaning of the rented area
  • Repairs and maintenance
  • Food, such as breakfast provisions, made available to the guest
  • Professional photography for the listing
  • Service fees and commissions charged by Airbnb.

Sources- https://www.housing.vic.gov.au/

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top