Renting out part of your home can be a great way to generate extra income, but it also brings certain tax obligations. One of the key aspects to understand is how to apportion rental expenses.
How much of the expense that can be claimed will depend on:
- the number of days you rent out the house or property during the year
- the portion of the property you have rented out (for example, a room or the whole property). As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user) and add that to a reasonable amount based on their access to common areas.
- the period the property is genuinely available for rent, but only where the taxpayer does not use the home or part of the home for personal use when it is not rented.
Common expenses you can claim a portion of as deductions include:
- Fees or commission charged by the facilitator or administrator
- Council rates
- Interest on a loan for the property
- Electricity, gas and water
- Property insurance
- Repair and Maintenance
When you rent out all or part of your residential house or unit through a digital platform, like Airbnb, Home Away or Flipkey, you:
- need to keep records of all income earned and declare it in your income tax return
- need to keep records of expenses you can claim as deductions
- don’t need to pay GST on amounts of residential rent you earn
- also be aware that by providing short term accommodation in your main residence that you risk losing the likely lucrative full main residence exemption when it comes to selling your home which might result in some capital gains tax being payable when moving house.
