Do happy holiday-makers streaming into your local area each school holidays make you think about putting your home on AirBnB? While it seems like an attractive way to earn some extra cash, before you rent out all or part of your home on an online marketplace like AirBnB or Stayz – make sure you consider the tax implications of doing so.
The hidden tax costs of AirBnB and online house letting
Income Tax
Whether you rent out all or part of your home you are required to report all of the income in your Income Tax Return. You are allowed to claim deductions against that income.
Your deduction is calculated with reference to:
- the expenses incurred,
- the period of time the property was available for rent, and
- the floor space rented.
This also means that you are required to maintain and keep records of your rental income and expenses along with your other tax records.
Capital Gains Tax (CGT)
Ordinarily, any capital gain made on the sale of your primary place of residence is not subject to tax under the main residence exemption.
Renting all or part of your main residence will mean you can no longer claim the main residence exemption in full. A portion of the gain based on the floor area rented out and the length of time it was rented for will be assessable.
The exception to this is where you have moved out of the property completely and have not established another main residence; in this case, you can continue to apply the main residence exemption for up to 6 years.
Goods & Services Tax (GST)
Residential rent is not subject to GST, and accordingly, you will not have any GST obligations.
Provision of accommodation like hotel rooms or rent of commercial property is subject to GST.
So, before you jump online to rent out your home for the next holiday season, give us a call to chat about the potential implications and make sure you don’t receive a surprise tax bill in the future!