CGT and GST implications of operating through Airbnb – Part 5
The following paragraph lists some of the key income tax, CGT and GST issues when dealing with an individual taxpayer who makes money by providing accommodation through Airbnb.
A. General Issues
- In relation to pricing matters, the host and the guest agree on pricing. Airbnb collects payment from the guest and passes the payment on to the host less a 3% host service fee. Note that, under this arrangement, the host is entitled to the gross listing fee and, as such, it is the gross fee that carries tax consequences for the host (e.g., the gross listing fee is subject to income tax).
B. Income tax issues
- The gross Airbnb income must be included in the host’s assessable income (i.e., including the 3% host service fee). However, the host is able to claim a deduction for substantiated expenses relating to the provision of the Airbnb accommodation. Deductions commonly include holding costs (interest, rates and land tax) and non-holding costs (utility costs, repairs, decline in value). Other deductions include the 3% host service fee, photography costs relating to the Airbnb listing, food for the guests and linen and laundry costs.
- In some cases, deductions may be reduced (e.g., where the expense is partly private or the accommodation was only provided for the part of the year).
In some cases, deductions may be denied. Note that a period of vacancy does not necessarily mean the accommodation is not ‘genuinely available for rent’. However, if the taxpayer has incurred losses in relation to the accommodation the ATO may take a closer look.
C. GST issues
- In the vast majority of cases, a supply of accommodation via Airbnb constitutes an input taxed supply of residential rent. Where this is the case the listing fee is not subject to
GST and the host cannot claim ITCs in respect of acquisitions.
Be cautious if the accommodation is being provided on a larger scale (e.g., multiple occupancies at one time) as this could be a supply of accommodation in commercial residential premises, which is subject to GST.
D. CGT issues (arising on sale of the taxpayer’s dwelling)
- Taxpayers providing accommodation through Airbnb who also live in part of the dwelling (i.e., where the dwelling is owned by the taxpayer and is partly used for income producing purposes) should be aware that only a partial main residence exemption will be available on the sale of the dwelling. This is because S.118-190 requires an adjustment to be made to reflect the income producing use where, if it is assumed the taxpayer borrowed to acquire the dwelling, the taxpayer was able to claim a deduction for mortgage interest.