Renting out all or part of your home

(ATO)

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.

If you are carrying on an enterprise renting out commercial residential premises, such as a commercial boarding house, you will have different income tax and GST obligations. However, just because you provide services in addition to providing a room (for example, provide breakfast or cleaning services) doesn't mean that you are providing 'board' or anything else other than renting out your space. It is rare for someone to be carrying on a business because they are renting out a property.

How GST applies to residential rent

GST doesn't apply to residential rent. You're not liable for GST on the rent you charge, and you can't claim any GST credits for associated expenses.

This applies even if you carry on another GST-registered enterprise. For example, if you're a ride-sourcing driver, you will need to account for GST on your ride-sourcing activity, but you don't need to account for GST from income earned from renting out a room or a house or unit. This is because GST doesn't apply to residential rent.

You have to pay GST if you provide accommodation in commercial residential premises, such as a hotel room or serviced apartment, a bed and breakfast, or if you rent out commercial spaces like a function room or office space. These types of accommodation are subject to GST.

Income and deductions for renting out your home

If you rent out all or part of your house or unit, the payments you receive are assessable income. This means:

• you must declare the income as rental income in your tax return
• you can only claim deductions for associated expenses apportioned:
  • for the time the room/property is rented (or occupied for payment), and
  • to reflect only the part of the property that is rented.

It doesn't matter who registers on the platform, income is declared by the owners of the property, according to their ownership or lease interest in the property. For example, if you have a 12-month lease on an apartment and occasionally rent out a room through a digital platform, you will need to declare any income you earn from this.

You may also need to pay capital gains tax (CGT) when you sell the house or unit. Even if the house or unit is your main residence, renting out any part of it usually means losing part of your CGT main residence exemption.

You will need to keep records such as:

• statements from platforms that show your income
• receipts of any expenses you want to claim deductions for.

How capital gains tax applies

You make a capital gain if you sell a CGT asset, such as a house, and make a profit. Any gain you make is assessable income and you must include that amount in your tax return for the year that you make the gain. The amount of tax you pay on a capital gain depends on a range of factors including when you bought and sold the asset, the cost of the asset, your other taxable income, and how you use the asset.

A capital gain from the sale of your main residence is usually exempt from capital gains tax (CGT). However, if you use your main residence to earn income, for example by renting out a room on a sharing economy platform, you will no longer eligible for the full CGT exemption on that main residence. You will lose a portion of your main residence exemption based on the floor area rented out, and the length of time it was rented.

There are some circumstances where you won't lose the CGT main residence exemption, for example where you move completely out of your main residence to live in another home for a period of time.

If you use a sharing economy platform to rent out all or part of a property that you don't own, CGT doesn't apply to you.