Similar to Uber business, Airbnb is also technology-based business. It matches people looking for short term accommodation with home-owners (hosts). It is attractive to home-owners as it offers flexibility and a higher return (comparing to a long-term tenant). The benefit for guests is the rates are often cheaper than other types of commercial accommodation.
For 2016 ATO audit targets, ATO will focus on ‘sharing economy’ businesses. The main players of this type of business are Uber and Airbnb. This article will focus on Airbnb business. For Uber business, please click on this Uber link.
GST implication
Airbnb is generally considered as an input taxed supply of residential rent. Therefore it does not require to remit GST. Similarly no entitlement applies for GST input tax credit on the expenses related to the supply of accommodation.
At a larger scale, the hosts may register for GST. Generally, it is compulsory to register with GST when the turnover exceeds $75,000. In this case the supply is taxable for GST purposes.
In GSTR2012/6, ATO provide detail explanation of commercial residential premises included a hotel, motel, inn, hostel, boarding housed or anything similar. ATO clearly states that a single home let on a short-term basis is not a supply for commercial residential premises.
Income tax implication
The vast majority Airbnb hosts would not be considered to be carrying on a business. Regardless carrying on a business or not, the income is ordinary income and is taxable. In this case your assessable income must include the gross income.
The expenses related ‘solely’ to the provision of Airbnb accommodation are deductible in full. These may include:
- host service fees,
- photography costs,
- decline in value furnishings/furniture,
- linen and laundry costs,
- guests food & entertainment,
- repair and maintenance to the Airbnb area.
Expenses related to Airbnb host’ private are not deductible. The shared areas may require apportionment. Example for this are:
- utility costs,
- Wi-Fi/phone,
- mortgage interest/insurance/council rates/ water rates,
- cleaning cost for shared areas,
- gardening cost.
CGT – Capital gain tax implication
Normally when your house is your main residence, capital gain tax will apply under S.118-190 main residence exemption. However if you are using part of your house for Airbnb, the disposal event may trigger a capital gain. The calculation is based on the percentage are of Airbnb operation. In this case the CGT exemption only applies to your private main residence.
For further information please see this ATO link.