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Airbnb Tax Crackdown – Your Compliance Guide

Are you one of the record number of Australians with Airbnb, Uber, or other sharing economy income? The ATO’s recent tax crackdown on the “side hustle” has seen data-matching ramped up to ensure compliance, with inflated deductions and omitted income firmly in their sights. With this increased level of scrutiny, how can you stay out of the ATO’s crosshairs?

Tax Obligations for Airbnb & Sharing Economy Income

In Australia, renting a property through Airbnb can have tax implications, and it is crucial to understand how these obligations impact you and your property. Airbnb income is assessable, meaning it is subject to taxation, and Airbnb hosts have some key tax obligations to be aware of.

• Earnings must be Declared: Airbnb hosts are required to declare their rental income in their tax return, and failing to do so can lead to penalties and legal consequences. The ATO receives data from a range of sources, including Airbnb themselves, so any undisclosed income will only become more detectable as time progresses and data-matching capabilities improve.
• Deductions are Available: The good news for Airbnb hosts is that you can claim deductions for expenses related to renting out your property, including cleaning, maintenance, utilities, and interest on your mortgage. The ATO are focussing closely on “inflated” deductions, so ensure you keep accurate records of expenses to support your claims.
• Capital Gains Tax (CGT): If you rent out a part of your home on Airbnb, you may be eligible for a partial exemption from CGT when you sell your property. However, certain conditions must be met, and it’s advisable to seek professional advice to ensure compliance. You can read more about the main residence CGT exemption in this article.
• Goods and Services Tax (GST): If your Airbnb hosting activity exceeds the GST turnover threshold (currently $75,000), you may be required to register for GST and charge it to your guests. However, this also means you can claim GST credits for eligible expenses. This is only applicable for properties that are considered commercial residential premises. It is advisable to seek professional advice to ensure compliance.
• Property Ownership: Before listing your property on Airbnb, you should make sure that you have the legal right to rent it out. Some properties may have certain restrictions or require specific approvals, such as strata or local council permissions.

The ATO has a number of resources available on their website for the “Sharing Economy and Tax”, which you can access here.

Tax Tips for Airbnb & Sharing Economy ATO Compliance

While there are a number of critical tax obligations and considerations for Airbnb owners, the following items can help you not only stay off the ATO’s radar, but also more effectively plan for any tax liabilities you may incur.

• Keep Thorough Records: The foundation of accurate ATO compliance is the maintenance of detailed records of all income and expenses related to your Airbnb hosting. This includes invoices, receipts, and bank statements, and such records are a key part of your tax return preparation.
• Engage a Tax Professional: The Australian tax landscape can be tricky to navigate even if you don’t have an Airbnb, so when you do have sharing economy income to manage, a tax professional can make all the difference in simplifying this complexity.
• Use the ATO’s Online Tools: The ATO has a number of online tools and resources for Australians engaged in the sharing economy. These can help you understand your obligations and calculate your income and deductions accurately.
• Set Aside Funds for Taxes: Much like running a business, thorough Tax Planning gives you the foresight to set aside a portion of your Airbnb earnings for any tax bills that might arise. This means once tax time comes around, you’ll have the funds available to meet your obligations.
• Regularly Review ATO Guidelines: Tax legislation and regulations can change, so it’s essential to stay updated with the latest ATO guidelines. Also consider subscribing to the McKinley Plowman newsletter (via our website) to keep on top of things.
• Explore your Insurance Options: Airbnb hosts face unique risks, such as property damage or liability issues. It goes without saying (though we will anyway) that you should obtain appropriate insurance coverage to protect yourself and your property.

How MP+ Can Help

The sharing economy opens up opportunities to grow your property portfolio and increase your income but brings with it additional tax and compliance obligations that can catch some people unaware. McKinley Plowman’s integrated, coordinated service offering combines the experience and knowledge of property specialists, tax planning, finance brokers, and of course accountants, to ensure that your Airbnb and sharing economy interests are looked after end-to-end.

To find out what we can do for you to help you level up your Airbnb tax compliance, contact us today on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or via our website.

written by:

Levi Both

Since entering the accounting industry over a decade ago, Levi has worked in senior positions alongside clients of all different sizes and industries, and joined McKinley Plowman in 2022. He combines his invaluable experience with his Chartered Accountant (CA) and Chartered Tax Adviser (CTA) qualifications, and delivers outstanding results for MP+ clients. At MP+, Levi works with clients to start, grow, and improve their business, and enjoys developing sounds tax and business development strategies to help them reach their goals.

Levi has a particular knack for optimising tax results, equipping clients with effective business structures, and delivering thorough forecasting to facilitate business growth. He loves seeing clients achieve their growth objectives and obtaining optimal tax results.

When he’s not in the office working hard for clients, you’ll find Levi spending time with his young family, and playing & watching soccer and AFL.