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How to claim Airbnb tax deductions in Australia?
Capital Works Deductions (Division 43)
2 August, 2022
Home Building Act NSW
1 November, 2022
There’s been a lot of misunderstandings regarding the Airbnb tax deductions, specifically on how to claim it, what you can claim, and how much you can claim, as an Airbnb host. The issue has been troublesome to Airbnb rental property owners who are just starting out and want to use their property for rental purposes. The Airbnb tax rules are also complex for people who try to make the most of their renting properties on Airbnb.
In this blog post, we tried to provide answers to some common issues regarding the Airbnb taxes in Australia.
Table of Contents
Advantages of renting with Airbnb
Airbnb is a widely popular online service for short-term accommodations for tourists all around the world. Airbnb is a very popular hosting service for property owners, since it lets owners dictate the prices of the property and manage timeframes of guests.
Do I have to pay taxes on Airbnb?
The short answer is yes. If you receive money through renting your property (and it also applies to Airbnb rentals), that money is a part of taxable income, and is subject to taxes. In other words, if you use a part of your property (or a whole) for income earning activities, such as the Airbnb rentals, then you have to pay taxes on Airbnb rentals.
What are my legal obligations with Airbnb rentals?
When renting a property on Airbnb, you have the following obligations:
- To keep records of all earned income and send it to ATO by a given deadline so that you can get the income tax return,
- To record all your applicable expanses on which you can claim tax deductions.
The activities above are essential for determining the exact tax deduction amount on Airbnb rentals. You need to document all applicable property expenses and earned rental income, so you could calculate the Airbnb tax return easily.
Airbnb tax deduction calculations
In general, there are two different situations when it comes to Airbnb rentals:
- When you rent out your entire property
- When you rent only a part of your home
These different situations imply that there will be different ways to calculate the tax deductions on your rental properties. We will describe them into more details in the following sections.
Rules for Airbnb tax deductions when renting the entire home
In case your entire property is dedicated to Airbnb rentals, and you don’t live there, you can claim the depreciation on your entire property, even without any occupants. However, to fulfil these criteria, you need to make sure that your property is available at market rate, and avoid renting it at the discounted rate.
However, if you move back to the house, it implies that the property is no longer intended for renting, and therefore, from that moment, you’re not eligible for claiming depreciation of Airbnb tax deductions in full amount. Instead, you need to calculate your tax deductions pro rata. Pro rata tax deductions mean that instead of renting your full property, you can only rent a part of it, since your home now becomes part private, and part rental.
Rules for Airbnb tax deductions for renting only a part of your home
When you rent only a part of your home, the tax calculation is usually based on the amount of floor area dedicated to the rented space. The additional possibility here is to claim depreciation for plant and equipment cost imposed by the rental activity.
What assets are claimable for Airbnb tax deduction?
If you had plant and equipment costs for the purpose of renting, you can claim the depreciation for those assets. However, there are some legal limitations to it. Due to the legislative changes in the construction sector, plant and equipment depreciation cannot be claimed for pre-existing assets. If you purchased brand-new assets to use it for Airbnb rentals, you still can claim the deductions on those assets, if they are placed in the rental area of your home. If the new assets are placed in the shared area, you can claim tax deductions on those assets only partially. Some of the assets that are claimable include:
- couches and beds
- tables and chairs
- appliances
What costs can you claim as Airbnb tax deductions?
There are likely some expenses in your property that you can contribute to the rental activity. Some of them include:
- Costs of repair
- Maintenance and cleaning costs
- Airbnb service fees
- Utilities costs
- Property management costs
Capitals Gain Tax and Airbnb rentals in Australia
Usually, selling your house means the sale is excluded from capital gains tax. The situation changes if the property has been used for Airbnb rentals, since it’s an income producing activity. In that case, a part of the CGT will be taxable. That means you will be required to pay CGT on a portion of the capital gain that occurred after selling your property.
CGT is something that many property owners on Airbnb tend to forget or get confused about. It’s not that easy to estimate the exact amount you are going to pay. However, some elements that can help you get some accuracy when calculating the CGT you need to pay are:
- Total floor space allocated for rental activity
- Total time period when the property was used for rental purposes
- If you’re compliant for the absence rule
What in case a loss occurs?
In the situation when rental expenses exceed the rental income, a loss occurs, and it can be claimed against other income sources, such as salary. In this case, ATO can limit the rental deductions to the extent they exceed the rental income.
Tips on how to increase tax deductions on Airbnb
Track and claim all deductions
Keep receipts for all expenses and records of all applicable costs such as water bills, utility bills, electric bills, maintenance invoices and others. You should also document all internet cost related to the rental activity, all advertising and website expenses.
Keep accurate records from the beginning
Keep accurate records from all bookings, vacancy dates, pricing changes, and create a property calendar with all important entries that can facilitate calculating potential deductions. If available, keep all receipts and other documents in paper form and keep them in a designated place.
Seek professional advice
Always consult with a professional, since calculating tax deductions on your Airbnb rental properties is a complex matter. Tax experts and quantity surveyors can help get the professional advice you need.
Reconcile your Airbnb forms
make sure that all of your earnings match the Airbnb 1099k form, if you have one. Usually the form is created if the rental income from the Airbnb exceeds $20,000 in one calendar year.
How we can help you out?
We offer expert advice for property owners, builders, and developers. With our professional advice, you’ll get the help you require when it comes to calculating your tax returns on your rental properties. Contact us on (02) 9522 6407 or at and request a quote today.
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