• I am renting out all or part of my house through the sharing economy

    When you rent out all or part of your residential house or unit through a sharing economy website or app, like Airbnb, Stayz or similar, 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.

    If you are carrying on an enterprise in which you rent out commercial residential premises you will have different income tax and GST obligations.

    Do I need to pay income tax on amounts received from renting out a room or whole house or unit?

    Yes. If you rent out all or part of your house or unit, the payments you receive are assessable income. This means:

    • you must declare the income in your tax return
    • you can claim deductions for associated expenses.

    You declare the income, and can claim associated expenses, for the income year as rental income in your income tax return.

    You may also need to pay capital gains tax (CGT) when you sell the house or unit. Even if the house or unit is your main residence, renting out any part of it usually means losing part of your CGT main residence exemption.

    See also:

    What deductions can I claim?

    The types of expenses that you can claim for renting out all or part of your house or unit using a sharing economy website or app are the same as if you had a rental property. Common expenses you can claim include:

    • fees or commission charged by the facilitator or administrator
    • council rates
    • interest on a loan for the property
    • electricity and gas
    • property insurance
    • cleaning and maintenance costs (products used or hiring a commercial cleaner).

    Whether all or part of the expense can be claimed will depend on:

    • the proportion of the year you rent out the house or property
    • the portion of the property you have rented out (for example, a room or the whole property)
    • whether you use the home or part of the house for personal use when it is not rented out.

    See also:

    Claiming deductions when only renting out part of the house

    If you are only renting part of your home, for example a single room, you can only claim expenses related to renting out that part of the house. This means you cannot claim the total amount of the expenses – you need to apportion the expenses.

    As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user), and add that to a reasonable amount based on their access to common areas.

    You can only claim expenses for when the room was rented to a client. If you use the room in any capacity, for example for storage or as an office when you do not have guests staying, then you cannot claim deductions for expenses when the room is not occupied.

    You can claim 100% of expenses that are only related to renting out the room to paying guests. For example, you can claim the whole commission or facilitator fee charged by the sharing economy website or app.

    Example: renting out part of your unit or house

    Jane has a two-bedroom unit with two bathrooms in a popular downtown area. Jane lives alone and only uses her spare room as an occasional home office, for storage and when she has guests. Jane mainly uses the ensuite bathroom. The second bathroom is accessible from the main areas and mainly used by visitors. Jane decides to rent out the spare room on a sharing economy website to earn extra income.

    The unit is 80 square metres in total. The spare room being rented is 10 square metres, and when paying guests come to stay Jane removes all excess items from the room and does not access the area.

    Jane also gives paying guests access to common areas including the second bathroom, kitchen, living area and balcony, which total 50 square metres. For the period guests are staying and have access to the common areas, Jane can claim 50% of associated costs.

    Jane also offers her guests access to her wi-fi for free.

    Jane had the room occupied 150 days in the year. When she is not renting out the room she uses it as storage and a home office.

      Claiming Rental Deduction

    Jane calculates what she can claim based on the following questions:

    • How big is the room? (in her case, 10 square metres)
    • How big is the house? (in her case, 80 square metres)
    • How big are the common areas? (in her case, 50 square metres)
    • How many days is the room rented out? (in her case, 150 days).

    She works out she can claim 17.97% of her general expenses after adding the two calculations together:

    • room occupancy – (10/80 x 150/365) x 100 = 5.13%
    • common areas – ((50/80 x 150/365) x 50%) x 100 = 12.84%.

    Jane can claim a deduction of 17.97% of her general expenses like electricity, interest on her mortgage, internet expenses, rates and body corporate fees.

    She can claim 100% of the expenses associated solely with renting out the room like the facilitator’s commission or administration fee.

    End of example

    See also:

    Claiming deductions when renting out your main residence on an occasional basis

    If you rent out your whole house or unit on an occasional basis through the sharing economy, you can claim the proportion of expenses related to the time when you were not at the house or unit.

    This may apply where you rent out the house or unit when you are away for a period of time, or you vacate the house or unit to allow paying guests to stay.

    In this case, the proportion of total expenses you can claim reflect the proportion of the financial year the house or unit was rented out.

    You can claim 100% of any expenses that are only related to renting out the house or unit to paying guests. For example, you can claim the whole commission or facilitator fee charged by the sharing economy provider.

    Example: renting out your main residence on an occasional basis

    John and Mary live in a one-bedroom unit in the city which they list as available for rent on a sharing economy app for paying guests. When John and Mary accept a booking for their unit they go and stay with Mary’s parents.

    Because the unit is John and Mary’s main residence, and they only vacate the place when they have a booking, they can only claim expenses on a proportional basis.

    Last year John and Mary rented out the unit for 100 nights. This means John and Mary can claim 27.93% of expenses (100/365 x 100).

    John and Mary can claim 100% of the expenses associated solely to renting out the unit like the facilitator’s commission or administration fee.

    End of example

    Claiming deductions when renting out an investment property

    If you have an investment property that you do not use at all for private purposes and it's genuinely available for rent on one or more sharing economy websites or apps then you can claim 100% of the expenses associated with the property.

    If you have an investment property that you use for personal use, like a holiday home, you claim expenses based on the proportion of the financial year the house or unit is rented out or genuinely available for rent.

    See also:

    Completing your tax return

    If you’re earning income by renting out property, even if it’s just a room, you must include your rental income if you have to complete an income tax return.

    If you don’t use a registered tax agent, you can do this using myTax.

    Remember to apportion your deductions for the rooms being rented.

    Watch:

    How to avoid a tax debt

    If you are earning more than $4,000 a year from renting out a room or a whole house or unit, or expect to earn more than $4,000 a year, you could consider entering the pay as you go instalment (PAYGI) system voluntarily. This will stop you getting a large tax bill at the end of the year. The PAYGI system allows you to pay amounts every three months (quarterly) to help cover any income tax you may need to pay on your sharing economy income.

    If you pay too much during the year, you will get the money back when you do your tax return.

    If you don’t pay enough during the year, you pay the difference when you do your tax return (but it will be less than if you didn’t pay anything at all).

    See also:

    What is capital gains tax and how may it apply to me when I rent out all or part of my house or unit?

    A capital gain is where you sell an asset (like a house) and make a profit. Any gain you make is assessable income and you must include that amount in your income tax return for the year that you make that profit. The amount of tax that you pay on a capital gain will depend on a range of factors including when you bought and sold the asset, your other taxable income, and how you use the asset. 

    Profit from the sale of your main residence is usually exempt from CGT. However, if you use the main residence to earn income, for example by renting out a room on a sharing economy platform, you are no longer eligible for the full CGT exemption on a main residence. You will lose a proportion of your main residence exemption based on the proportion of your floor area rented out, and the length of time it was rented.

    There are some circumstances in which you will not lose the CGT main residence exemption, for example where you move completely out of your main residence to live in another home for a period of time.

    If you are using a sharing economy platform to rent out all or part of a property that you do not own, CGT does not apply to you. However, renting out a property you do not own may require approval, and may incur fees or charges. You should check your local council and state or territory regulations to understand your obligations. 

    Watch:

    See also:

    If I am renting out a room or a whole house or unit, do I need to pay GST?

    No. GST does not apply to residential rent. You are not liable for GST on the rent you charge, and you cannot claim any GST credits for associated costs.

    This applies even if you carry on another GST registered enterprise. For example, if you are a ride-sourcing driver, you do not need to account for GST from the income earned from renting out a room or a house or unit. This is because GST does not apply to residential rent.

    However, you do have to pay GST if you provide accommodation like a hotel room or serviced apartment, a bed and breakfast, or you rent out commercial spaces like a function room or office space. These types of accommodation are subject to GST.

    See also:

      Last modified: 07 Apr 2017QC 45171