The share economy landlord
The rise of the share economy is producing a new breed of landlord – many of whom are unaware of their tax obligations.
The number of people offering their homes on sites like Airbnb, HomeAway and VacationRentals is increasing exponentially. There are currently more than 50,000 Australian properties listed on Airbnb alone.
Airbnb hosts earn an average income of $7,100 per year by renting out their homes occasionally to supplement their incomes. But many hosts are failing to declare this income, and, if they think they will fly under the radar, they may be in for a shock.
The ATO has specifically identified this income type as a target for FY16. Last May the ATO released advice on the implications of the share economy and noted that the tax rules apply regardless of how the rental house or room is advertised.
The ATO will also be able to easily identify properties being used for this sort of short-stay accommodation, with access to numerous sources of third party data and the sites themselves (which list the properties and their addresses/owners). It’s then a case of matching tax returns with this income information.
While any income earned from renting out property (including just one room) must be declared in the host’s income tax, the expenses incurred are also usually deductible.
A lesser known tax implication for hosts relates to capital gains tax (CGT). Many people make the incorrect assumption that any profit on the sale of the family home (or primary residence) is tax-free. However, if the property was used to generate an income, such as by renting out a room via Airbnb, then the owner could face a CGT bill when they sell the home.
Anyone looking at entering into this kind of rental provision should speak with their financial advisors to make sure they understand all of the tax implications. In addition, the owner should also check on their insurances to make sure they and their property is properly covered.