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  • Income tax requirements

    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 tax return.

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

    Remember to only claim for the time the rooms are being rented.

    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.

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    Deductions you can claim

    Common expenses 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 number of days you rent out the house or property during the year
    • 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's not rented out.

    See also:

    Renting out part of a home

    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 can't claim the total amount of the expenses – you need to apportion the expenses.

    As a general guide, apportion your expenses based on the floor-area solely occupied by the renter (user), and add that to a reasonable amount based on your guest's access to common areas.

    You can only claim expenses for when the room was rented to a client.

    Example: renting out part of your home

    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 is 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.

    Jane also gives paying guests access to common areas including the second bathroom, kitchen, living area and balcony, which totals 50 square metres. She also offers her guests access to her wi-fi for free.

    For the period guests are staying and have access to common areas (along with Jane), Jane can claim 50% of the deductible portion of associated costs related to the common areas.

    Jane had the room occupied 150 days in the year.

    This image accompanies the example for renting out part of your home and illustrates the layout of Jane’s home. It shows the size of each area, and shows that the rented area (her spare room) is 100% deductible for days room is occupied by a renter, common areas (the shared second bathroom, kitchen and lounge and balcony) are 50% deductible for days there is a renter, and for personal areas (Jane’s bedroom and bathroom) 0% deductions are allowed.

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

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

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

    • room occupancy − (10÷80 × 150 ÷ 365) × 100 = 5.13%
    • common areas − ((50÷80 × 150 ÷ 3 65) × 50%) × 100 = 12.84%.

    Jane can claim a deduction of 17.97% of her general expenses such as 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, such as the facilitator’s commission or administration fee.

    End of example

    Renting out your main residence on an occasional basis

    If you rent out your home (whole house or unit) on an occasional basis through the sharing economy, you can claim the portion of expenses relating to when you rented it out.

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

    In this case, the total expenses you can claim reflect the portion 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.

    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 stay with Mary’s parents.

    Because the unit is John and Mary’s main residence, and they only vacate the place when there's a booking, they can only claim expenses based on the time that it was rented out.

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

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

    End of example

    See also:

    Last modified: 05 Sep 2017QC 53226