AirBnB: Good income or tax trap?

AirBnB can create extra income for you and your family, however this can cause some adverse tax consequences. 

Firstly, the income will need to be included in your tax return each year that you earn income from your property. However, a big potential down side is that if you use your principal place of residence for income producing activities you may be subject to capital gains tax on the income producing portion of your house when you sell. 

Think again if you’re planning to leave out the income or capital gain from your house or room renting activities. The ATO data matching technology is improving every year and is starting to match data from the sharing economy with individual tax returns. 

AirBnB ‘landlords’ will need to work with their tax agent to ensure that they correctly calculate the capital gain when using their house for AirBnB or other income earning activities in the house. 

Here are the main financial planning issues to consider when you’re considering renting your spare room or granny flat:

  • Apportioning the deductible expenses associated with the income producing portion of the home.
  • Consider whether you can claim some of the interest costs on your home mortgage.
  • It may be more beneficial for some to rent out their home on an ongoing basis and for them to rent elsewhere. This way, the home retains its main residence status for capital gains tax purposes for 6 years unless you purchase another home. This can be a more efficient use of funds from a debt reduction tax minimisation perspective.

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We do not guarantee that the information in these articles is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

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