Do I have to pay tax on my Airbnb income?

Renting out a spare room is a great way to earn extra income. But what are the tax implications in Australia for your Airbnb property?

By K+P Team  |  26 May 2021

Airbnb is without a doubt the greatest success story of the ‘sharing’ economy. What began as an idea when three mates needed to make some money for rent, is now a global company currently valued at around $75 billion.  

With a simple, safe and efficient business model that can be tailored to the needs of both the hosts and guests, it’s no wonder there are roughly 346,000 Airbnb listings in Australia alone. 

And while it’s still a great way to make extra dollars, do you have to pay taxes on Airbnb income?

What is Airbnb? 

Launched in 2008, Airbnb is a short term rental platform that allows hosts to rent out properties to earn extra income. These properties can be anything from a spare room in your own home, a granny flat on your property to an investment property in another state or country. And anything and everything in between. 

Run via an online platform and app, guests can choose the type of accommodation they want or can afford, giving it a distinct edge over the more traditional hotels and motels. Perhaps one of the best features is the ability for both the hosts and guests to be reviewed – the hosts on their property and the guests on previous Airbnb stays.

What is the sharing economy? 

According to the Australian Taxation Office (ATO):

The sharing economy is economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee.

If you provide services or assets through a platform for a fee, you need to consider how income tax and goods and services tax (GST) applies to your earnings.

Popular sharing economy activities include:

  • renting out a room or a whole house or unit on a short-term basis, through platforms such as Airbnb, HomeAway or Flipkey.

Do I have to pay Airbnb taxes? 

In a word, yes. 

But tax can be complicated and the tax you pay will depend on your specific circumstances. Every situation is different and you should always seek out professional tax advice before you take the plunge. 

As with any other income, Airbnb earnings will be deemed taxable income by the ATO. Money you earn through a rental property, whether rented privately or via a website or third party app, is taxable income and you need to take this into consideration. 

It’s also worth remembering that you’ll be taxed on your gross income, not the amount you receive from Airbnb. Fees such as cleaning and service fees will already have been deducted.

Be sure to put aside extra money for tax time as your Airbnb income may just push you into the next tax bracket.

What kind of expenses can I claim as tax deductions? 

If you’re renting out an entire property, all associated running costs will be tax deductible. If you’re renting out a spare room in your own home, your claim will need to be proportional.  

As with any other rental property, you’ll be able to claim tax deductions for any expenses relating directly to the property. This may include:

  • Airbnb service fees and payments
  • professional photography for your listing
  • property management fees
  • depreciation of furniture such as beds, lounges, tables and desks
  • commercial cleaning costs of the rented space
  • repairs and maintenance
  • supplies made available to Airbnb guests such as breakfast foods, tea, coffee or snacks 
  • other supplies such as toiletries 

To be able to claim, the ATO expects that: 

When you rent out all or part of your residential house or unit through a digital platform, like Airbnb, you:

  • need to keep records of all income earned and declare it in your income tax return
  • need to keep records of expenses you can claim as deductions
  • don't need to pay GST on amounts of residential rent you earn.

Records need to be retained for a minimum of five years. 

What items are fully, partially or non-deductible? 

Try asking yourself the following questions:

Is the expense directly related to the space I’m renting? Such as a bed, desk or chair for the sole use of your guest. Then it’s fully deductible

Is the expense for a shared area? Such as a living room, kitchen or laundry. Then it’s partially deductible.

Is the expense for a private area of my home? If the Airbnb guest doesn’t have access, then this is a non-deductible expense.

Depending on how you answered, you may be able to claim for percentages of things such as your mortgage interest, utilities (electricity, internet etc), insurance and council rates.

Capital Gains Tax (CGT) for Airbnb rentals 

You usually don’t have to pay CGT on your family home. Although if you’ve rented out a room in your home, or your holiday home and you’ve claimed tax on the mortgage interest, you might have to pay CGT when you sell. So being aware of this and factoring it into your decision to rent out a portion of your home is important. 

Goods and Services (GST) for Airbnb rentals 

You don’t pay GST on residential rentals, even if you turnover more than the annual GST threshold of $75,000. 

If you’re thinking of renting out your property, or even if you already do and you need some sound tax advice on Airbnb in Australia, we’d love to chat with you. Sites like Airbnb and booking.com are fantastic options to boost your income but need to be carefully considered with tax professionals like the team at Kelly+Partners. 

Contact us to book a discovery session today or get in touch with your Kelly+Partners Client Director.

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