In Australia’s booming sharing economy, platforms like Airbnb have created opportunities for homeowners to earn extra income by renting out a spare room or their entire property. But with income comes responsibility—and understanding the tax obligations is crucial to staying on the right side of the ATO (Australian Taxation Office). Below is a guide on the key tax implications, including income declarations, deductions, CGT, and the importance of record-keeping for short tern rentals.
Declaring Rental Income
If you rent out any part of your property—whether it’s a single room or the entire home—the ATO requires you to declare this income in your tax return. This rule applies regardless of how often or how much space you rent.
Keep in mind:
- Even if you provide additional services (like breakfast or cleaning), it usually doesn’t qualify as a “business” under ATO definitions.
- You must keep accurate records of income received and provide supporting documents for any deductions.
Tip 1.
Use a digital spreadsheet or accounting app to track every booking and payment received. Set a calendar reminder each quarter to review and organise your rental income documents.
Capital Gains Tax (CGT) Considerations
Many homeowners assume their main residence is entirely CGT exempt—and while this is true under most circumstances, renting out a portion of your home changes the rules. When you rent out part of your property:
- The CGT main residence exemption may be reduced.
- The reduction is calculated based on the percentage of the floor space rented and the length of time it’s rented.
- If you move out and rent the entire home, you may still qualify for the full exemption under the “six-year rule” if the property isn’t used for producing income beyond that period.
Tip 2.
Before listing your property, speak with a tax professional to assess how short-term rentals might affect your future CGT liability—especially if you plan to sell the property down the line.
Deductions You Can Claim
Renting out space in your home also means you can claim a portion of certain household expenses related to that space, such as:
- Council rates
- Mortgage interest (if applicable)
- Utilities (electricity, water, gas)
- Property insurance
- Cleaning and maintenance costs
- Airbnb or other platform service fees
The claimable amount depends on:
- The percentage of the home rented out
- The number of days in the financial year that space was rented
Tip 3.
Create a simple calculation sheet that records how much of your home is rented and for how long. This helps accurately split expenses between personal and rental use come tax time.
Importance of Record-Keeping
The ATO uses advanced data-matching technology to cross-check income reported on tax returns with figures provided by platforms like Airbnb. If your reported income doesn’t match what Airbnb submits, you could face an audit or penalty.
You should:
- Keep monthly statements from rental platforms
- Retain receipts for any deductible expenses
- Save communications with tenants (e.g., booking confirmations or check-in/out notes)
Tip 4.
Store all your documentation in a cloud folder (e.g. Google Drive or Dropbox). Label each item clearly with the date, purpose, and rental period to make tax filing—and any future ATO checks—quick and painless.
Conclusion: Protect Yourself and Your Earnings
Short-term rentals can be a great way to earn additional income, but it’s essential to treat it like a business when it comes to taxes. The ATO is closely monitoring the sharing economy, and failing to declare income or keep proper records could lead to penalties or loss of deductions.
Key takeaways:
- Always declare your rental income—even for a single night’s stay.
- Understand how your rental activity may affect your Capital Gains Tax exemption.
- Keep accurate, up-to-date records of all income and claimable expenses.
- Use digital tools and expert advice to stay compliant and maximise returns.
Final Tip:
Consider speaking to a registered tax agent each year to review your short-term rental income, deductions, and potential CGT exposure. A few hundred dollars in advice could save you thousands in tax or penalties.
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How can we help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
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