The ATO has reminded taxpayers of the sharing economy tax implications, when providing accommodation. 

The sharing economy provides an excellent opportunity for individuals with spare rooms or spare houses to rent out space and earn rental income using facilitators such as Airbnb.

This comes as the ATO announces a new data-matching program specifically targeting around 190,000 taxpayers receiving income from short-term rentals. The ATO said it would examine the information provided by online platforms like Airbnb to identify taxpayers who had left out rental income and over-claimed deductions.

If you are renting out rooms of your home, or indeed entire properties – whether via Airbnb or another facilitator or just privately – there are some tax issues to be aware of: 

Rental Income 

This will need to be declared in your tax return, irrespective of whether you rent out a room or an entire property or whether this is your primary source of income. 

Rental Expenses 

Expenses from renting out your property can be a tax deduction. However, there can be several complexities. Expenses directly associated with the rented area are deductible in full. In contrast, expenses that relate to shared areas (i.e., areas that you, as the host, may share with renters) must be apportioned. Expenses that relate to the host’s private room only are not deductible. 

Capital Gains Tax 

Broadly, the sale of your primary residence is free from Capital Gains Tax (CGT) when you sell it, where it was the primary residence for the entire time you owned it, and it was not used to produce income. However, if you are renting out a portion of your home, you will only be eligible for a partial principal residence exemption. If you rent out the entire house, then none of the property will enjoy the principal residence exemption for that period. Exceptions apply, including the ability to rent out your home for six years yet still enjoy the full CGT principal residence exemption. This exemption is subject to several conditions. 

It is important to note that properties purchased before 20 September 1985 are exempt from CGT, irrespective of whether they are rented out.

Goods and Services Tax  

Income from renting out part or all of a residential property is typically “input-taxed”. This means you should not charge GST on the rent you earn from guests. Conversely, you cannot claim GST credits for any rental expenses you incur, but you can claim the GST-inclusive amount of any rental payments as a tax deduction. All told, there is no requirement to register for GST because of your rental property alone. 

Record Keeping 

As your tax agent, we are limited in the claims we can make for you on your property to the records you keep.  So please retain all expense records (i.e. receipts) to maximise your deductions.