The true cost of renting out a room on Airbnb


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The cost of renting out a room

One of the success stories of the sharing economy has been Airbnb, the organisation which matches private accommodation to potential renters.

One of the challenges posed by this new way of renting has been getting to grips with the tax obligations. Here's my guide to getting your taxes right.


Income Tax

Rental income

Any income derived from rent will typically be assessable income and must be disclosed in your tax return.

Rental expenses

You can claim tax deductions for all expenses which are incurred in deriving your rental income.

These expenses fall into three categories:

  1. Expenses that are directly associated with the rented area can be deducted in full.
  2. Expenses that relate to shared areas need to be apportioned.
  3. Expenses that relate to the host's private area only cannot be deducted.

Some examples of expenses that may be deductible in full include:

  • Depreciation of furniture used in the rented room (such as beds, desks and drawers);
  • commercial cleaning of the rented area;
  • repairs and maintenance;
  • food (such as breakfast provisions) made available to the guest;
  • professional photography for the listing; and
  • service fees and commissions charged by Airbnb.

Where there are expenses that relate to the entire property, apportionment is required, typically based on the floor area used for renting compared to the total floor area of the property.

Some examples of expenses that relate to the entire property that may be apportioned include:

Expenses that relate to shared areas can be apportioned based on access. So, if the host and the landlord both have equal access to, say, the lounge and the kitchen, you can deduct 50% of these expenses.

Examples of expenses that relate to shared areas only include:

  • depreciation on furniture and appliances located in shared areas (such as sofas, TV's, kitchen equipment).
  • internet, phone and cable TV costs.

One final thing to note in relation to expenses is that they are only deductible where an area of the house is either actually rented out, or available for rent. For example, where a room is advertised as available for rent for 180 days a year then only the portion of rental expenses that were incurred over that 180-day period are deductible.

airbnb tax

Capital Gains Tax

In most cases, when you sell your private residence, the sale is free of capital gains tax. However, if you have used part of the property for income earning activities - like renting it out through Airbnb - part of the gain will be taxable. This might mean that you have to do a tricky calculation on sale to work out how much of the gain is taxable and how much is covered by the main residence exemption.

Goods and Services Tax

Good and services tax (GST) doesn't apply to residential rents, so you're not liable for GST on the rent you charge, and can't claim GST credits for associated costs. This is the case even if your turnover exceeds the GST threshold of $75,000.

Land Tax

Normally, you don't have to pay land tax (which is a state based tax) on your main residence. There is evidence that some states have tried to levy land tax on Airbnb hosts on the basis that they are running a commercial enterprise. Most legal opinion dismisses this as a "cash grab" but it might we worthwhile getting legal advice to ensure that your situation will not trigger the tax.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.
October 27, 2017 4.46pm

Hi Mark, thanks for the interesting article! You mention that expenses can be deducted for the time when the property was AVAILABLE for rent . How about CGT? Is CGT calculated from the period where the house was AVAILABLE for rent or ACTUALLY rented?

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