If you own a home and plan to go on vacation, listing it on Air BnB can be a good way to earn extra income. Similarly, that unoccupied room in your house can be a source of income if you lease it out for some period. Some people even re-rent part of their rental apartment as a side hustle. However, these arrangements attract hefty taxes on the Australian Taxation Office. In this guide, you will find tips on Air BnB tax and how to plan before it is too late.
Extra Income means Extra Tax, and that is no exception in Air BnB Hosting
Most hosts may be glad with the prospect of earning extra from their idle rooms but they are unaware of its implications with the ATO. A common tendency is for them to spend the extra income without saving for the tax man. This often leads to trouble once the reality dawns on them. For every 100 extra dollars you make from Air BNB hosting, it is advisable to save 30 to 40 dollars for tax. Tax calculations are complex but they depend on the size of rented space and duration of lease.
Requirements for Re-renting Property on BnB
It makes sense to rent out that extra room in your rented property if you are not using the whole of it. However, like the agreement with your landlord, the new arrangement requires a separate tenancy agreement too. Air BnB hosting being still a new venture, its policies are yet be standardized. First confirm the requirements in your state before re-renting property. Check also the Body Corporate laws in your area if you live in an apartment. You may as well consult with your landlord to be on the safe side.
Notifying the Authorities
It is quite tempting not to mention the new venture when filing your tax returns. Unfortunately, Air Bnb tax is real and the ATO is keen to have all hosts comply. It is best to mention your Air BnB hosting income, however little it is because sooner or later you will be found out. In some states, it is even a requirement to provide tax related information to Air BnB before hosting. Some of your proceeds may be withheld if you do not file returns on the same at the end of the year.
Air BnB and Capital Gains Tax
Capital gains tax is payable whenever you sell a rental home. Although CGT is not payable on a family home, this status changes once you rent out all or part of your family home. Expect an ATO tax bill once you sell a family home that had been rented before.
Claiming for Deductions
Air BnB taxes are always hefty, sometimes exceeding the gains you received from hosting. However, this can be substantially reduced if you claim for expenses and depreciations over the rented space. The ATO considers deductions for expenses such as water, Internet, and power among other utilities. Also state the interests that have been accruing from your mortgage if any. Equipment costs and furnishings depreciate with time, so be sure to estimate the same to the ATO. Remember good record keeping can save you many dollars on your Air BnB tax.