Airbnb – are you aware of the tax consequences?
Using Airbnb and similar platforms to rent a spare room or holiday home has become increasingly popular. Airbnb provides a relatively simple platform to market and rent your room or home. However, there are tax and other consequences associated with Airbnb of which you need to be aware.
Firstly, any money you receive from renting your room or home will be income on which you will need to pay income tax. Of course you will incur costs in earning that money, which may be deductible from that income. However, where you are also using the property, the mixed-use asset rules may apply to prescribe the manner costs are apportioned between deductible (income-earning related) amounts and non-deductible (private) amounts. Even when the mixed-use asset rules do not apply, an acceptable method for apportioning expenditure will be required.
Secondly, there may be GST consequences, which are often overlooked. Letting a room or home on Airbnb for short-term stays is potentially subject to GST. If you are not registered for GST, income you earn from Airbnb, either on its own or in conjunction with other income you earn, may take you over the threshold for compulsory GST registration. If you are already GST registered you will need to account for GST on the money you receive from letting through Airbnb. Furthermore, if you are required to register for GST, the property has now been brought into the GST net, meaning you may need to account for GST on the sale of the property.
Finally, there are other factors that you need to consider. For instance, does your insurance policy cover you while the property is rented? Are there council requirements such as notifications or consents, or increased rates that you need to consider?
It is important to remember, the thing that makes it easy for you to rent a property on Airbnb is the same thing that makes it easy for Inland Revenue and local councils to monitor your activity.
If you are letting a room or home on Airbnb or are thinking of doing so, contact your Findex adviser to discuss your potential tax exposures.