Like everyone you would like to have more money in your pocket, so you decide to rent out a room or even your whole house.

You have heard about Airbnb and decide ‘What a great idea’. A bit of extra cash would come in handy!

So, you think – I will pocket the extra money and no-one will be any wiser. Well, it is part of the share economy and you are advertising on the internet. It wouldn’t be hard for the ATO to search the web and find out that you are renting your premises – it’s one of the areas the ATO is monitoring.

Now the good thing is that, as it is a residential property, you don’t have to worry about registering for GST.

Airbnb can trigger Capital Gains Tax when you sell your home. ‘Yes’, you are right CGT is generally not payable on your family home, but when you rent out your home or even a room, suddenly it is viewed differently by the ATO –  you will need to consider the CGT consequences before you start renting it out.

Also, the income you receive is taxable and will need to be included in your income tax return.

The amount of tax payable will depend on your marginal tax rate. So, it might not be just a few dollars you need to put aside.

As you have to include the income, you are also entitled to claim deductions against the income.

For example:

Internet costs

Water, power, council rates

Upkeep and repairs

Depreciation on the cost of furnishings and equipment

Interest on your mortgage

If you are only renting out a room, the costs will need to be apportioned accordingly.

Always keep records, so you can substantiate if ever requested.

If the incorrect income or expenses are recorded and the ATO audits you, don’t be surprised if you end up with back taxes, fines, penalties and interest charges.  As we are self-assessing, it might be this year the ATO catches up with you.  But it might be a few years down the track and the fines, penalties, etc., will be larger.

If you have any questions, please do not hesitate to contact Optima Partners – Your Pathway to Personal and Financial Security – phone 6267 2200.

Zoi Yannakis – OP Accountant