Internet based business – Airbnb (part 3)
Claiming deductions during periods of vacancies between guests?
Given the short-term nature of Airbnb accommodation, it is likely that hosts will have periods of the income year in which the accommodation remains vacant (in some cases a negative gearing loss may arise in respect of the Airbnb activities). That, of itself, is not problematic, and the host can continue to claim relevant deductions (e.g., holding costs, non-holding costs – refer below), provided the property is ‘genuinely available for rent’. That is, provided the accommodation is available for guests and is still being actively marketed.
Of course, in order to be genuinely available for rent, the accommodation must not be priced at a level that is above market prices (indicating the host may not, in fact, genuinely wish to obtain guests). The ATO would also look closely at an arrangement where accommodation is only made genuinely available for rent during non- seasonal times of the year.
No deductions should be claimed in respect of any period during the income year in which the Airbnb accommodation is not ‘genuinely available for rent’ (i.e., apportionment is required).
Tax issues where taxpayers rents part of their home to Airbnb guests
Where a host rents out part of the residence as Airbnb accommodation (e.g., 1 or 2 bedrooms plus access to certain other rooms), the host can claim only that part of an expense that relates to the Airbnb accommodation.
In this regard, expenses can be generally be dealt with as follows:
- Expenses solely related to the provision of Airbnb accommodation are deductible in full.
- Expenses that relate to the host’s private area of the home only are not deductible.
- Expenses that relate to shared areas of the home require apportionment. As a general rule, apportionment of occupancy type expenses (e.g., mortgage interest, rates, insurance) should be made on a floor-area basis that is, by reference to the floor area of that part of the residence solely occupied by the tenant, together with a reasonable figure for tenant access to the general living areas, including garage areas if applicable.
Other types of expenses (e.g., running costs such as utilities, cleaning costs and decline in value for depreciating furniture) should be apportioned on a reasonable basis (e.g., in some cases, diary use over a representative period to distinguish between private use and Airbnb use may be appropriate). Refer ATO document: ‘Home-based business’ for guidance.