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 as rental income in your tax return
- you can only claim deductions for associated expenses – apportioned:
- for the time the room/property is rented (or occupied for payment), and
- to reflect only the part of the property that is rented.
It doesn't matter who registers on the platform, income is declared by the owners of the property, according to their ownership or lease interest in the property. For example, if you have a 12-month lease on an apartment and occasionally rent out a room through a digital platform, you will need to declare any income you earn from this.
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.
You will need to keep records such as:
- statements from platforms that show your income
- receipts of any expenses you want to claim deductions for.
Media: How to include rental income and expenses in myTax
https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubtjsfhwExternal Link (Duration: 01:59)
Deductions you can claim
Common expenses you can claim a portion of as deductions include:
- 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).
You may be able to claim 100% of fees or commission charged by the platform.
How much of the expense that 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).
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 home. This means you can't claim the total amount of the expenses – you need to apportion the expenses for both private and income-producing use.
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 the days in a year when the room was rented to a client. When a room in your home is not being rented out, it is treated as being used privately as 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. She 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 using a digital platform 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.
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, rates and body corporate fees.
She can claim 100% of the expenses associated solely with renting out the room, such as the platform's service fees or commission.End of example
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 (such as fees or commission charged by the platform).
John and Mary live in a one-bedroom unit in the city, which they list as available for rent on a digital platform 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 platform's service fees or commission.End of example
See also:Income you earn from renting out a room or your home through the sharing economy needs to be reported in your individual tax return. You can claim deductions for associated expenses.