Is Airbnb income tax free? Is there a catch?

Airbnb is a online marketplace that enables home-owners to list or rent short-term lodging including their homes, vacation rentals, apartments, hostels, etc. It is a success story of the sharing economy; sharing economy is a term used to describe a business model selling excess, ie. Uber.

The ATO (Australian Tax Office) has put Airbnb hosts on notice to declare their rental income on their tax returns.

Rental Income

You will be liable to pay income tax on all rent derived through Airbnb.

Capital Gains Tax (CGT)

That is all fine but what tax experts are warning people who rent out a room in their home is far greater than paying some tax on rental income. What many Airbnb hosts do not realise is that the taxman can take a large chunk of their homes sale price if and when they sell their properties.

Accountants are warning many people that taking part in Airbnb do not realise that they may be sitting on a large capital gains tax liability.

CGT is a tax that is calculated based on a how much the property is rented out for and how long it was rented out in comparison to how long it was your primary residence. This is usually done by working out what percentage of your homes floor area was rented out via airbnb. This percentage is than apportioned to the period that area was made available to rent throughout the duration of ownership.

Rental Expenses

Expenses incurred directly as a result of deriving rental income can generally be entitled to a tax deduction. For example cleaning, professional photography for the listing, service fees collected by Airbnb.

Goods and services tax (GST)

GST only applies to commercial rentals, so you’re not liable for GST on the rent that you have collected and can not claim GST input credits for the associated costs even if your income above the GST threshold of $75,000.

Disclaimer: The information contained within this website is for information purposes only and is not intended as a substitute for professional advice. The information provided is of a general nature and does not take into account the specific objectives, needs and/or financial situation of any individual. Accordingly you should consult with a qualified professional such as an accountant or financial adviser before acting on any of the information contained within this website.

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