Key Tax Tips for Accommodation Sharing

With the Commonwealth Games fast approaching we thought it would be a good time to discuss some of the tax implications of renting out your property.

The ATO is reminding taxpayers who rent out all or part of their home through accommodation sharing services to ensure they understand their tax obligations.

Declare Income

The ATO's Deputy Commissioner for Small Business, Deborah Jenkins, said the most important thing to remember is that all income earned from renting out all or part of a property needs to be declared.

"It doesn't matter if it's only for one week of the year, or a few weeks here and there, every dollar needs to be declared," Ms Jenkins said.

"We know that most people try to do the right thing, but we are concerned that some people don't understand their obligations. Unfortunately, there are a few who know what their obligations are but seek to avoid them. As the community would expect, we have them in our sights."

The ATO collects information from a range of sources, including banks, other government agencies and suppliers and other third parties. They also get information about purchases of major items, such as cars and real property, and have the ability to compare this information against income and expenditure that taxpayers report to the ATO.

The ATO are currently working with third parties in the accommodation sharing sector to provide greater visibility around these issues and to assist in compliance activities.

Be aware of the Capital Gains Tax implications

"Just like running a business from home, once income is earned from a primary place of residence there are Capital Gains Tax (CGT) implications. It is possible that if a property significantly increases in value, the amount of CGT owed may even be higher than the amount of income received," Ms Jenkins said.

The ATO encourages anyone considering renting out part or all of their primary residence to seek independent advice about the tax implications. Good record keeping will also assist in calculating the capital gain when the property is sold.

Only Claim Deductions You Are Entitled To

Deductions can be claimed against income earned through accommodation sharing, however it is essential that you keep good records and apportion expenses appropriately. You can only claim deductions that relate to the portion of the house which is rented out, and only for the length of time it is rented.

Incorrect rental property claims will not go unnoticed. The ATO are using increasingly sophisticated data analytics and risk modelling to identify incorrect or suspicious claims.

If you have any questions around your obligations please contact our office.