September 21, 2017

Airbnb and the Land Tax Risk in Australia

Airbnb makes earning a side income easy. But it might expose you to a range of tax risks.

Before going ahead and renting part of your primary home on Airbnb, consider the tax implications.

The sharing economy is a handy way to make money on the side of a regular income with assets you already have and at times which work for you. Take Airbnb for example; if you already have a house then it isn’t hard to rent a room on the weekends, or for two weeks during holiday periods when your away.

But, you might be opening yourself up to large tax liabilities. Why is this? Because rental properties and primary homes are treated differently for tax purposes. Here are some of the taxes you need to think about if you are an Airbnb host.

Land Tax

All states and territories charge some form of land tax. The obligations and liabilities are different in each state. Broadly speaking, land tax is charged on rented property and paid by the owner.

A primary residence – your family home for instance – is usually exempt from land tax. However, things can get murky if you start renting through Airbnb. If you are renting part of your home, the state revenue office may class it as a rental, and charge you land tax.

Income Tax

Any income you make from renting your property on Airbnb should be declared. The tax office can easily find out that you are making it, regardless of how you receive payment. Make sure you keep aside enough from each payment to cover your tax liability at the end of the year. The upside is you should be able to claim deductions against this income.

Capital gains tax

Like land tax, you are not required to pay capital gains tax on your primary residence. It is charged, however, on investments, such as a rented property. If liable, capital gains tax is imposed on the difference between your purchase price and the sale price. It has the potential to be a significant amount of money.

The federal and state governments are increasingly using ‘robots’ to find income and check people’s tax liabilities. So, there is no point trying hide the fact that you’re renting, if anything, you will just get hit will a fine once they do find you.

Before going ahead and renting part of your primary home on Airbnb, consider the tax implications. Talk with your accountant to get clarity on how your home will be treated should you start making an income in Australia, even if only part time.

About the author  ⁄ Marxa Dillan

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