There were around 100,000 AirBnB listings in 2022 when life started getting back to normal after the COVID restrictions. With 2 years of pent-up holiday demand, the number of AirBnBs is rapidly increasing to fulfil that demand.
Many Airbnb owners don’t claim depreciation, and even more, aren’t claiming depreciation correctly.
Holiday homes including Airbnbs attract special attention from the ATO. Making sure large deductions like depreciation are claimed correctly is vital to avoid issues later on.
Airbnb shares income data with the ATO
In 2019 the ATO started requesting from Airbnb the income details of all Airbnb hosts. The ATO would have suspected that perhaps not all Airbnb hosts were declaring the income they got from Airbnb. Surely that could not be the case? Surely people would know that income needs to be declared and that tax may possibly be due on that income? Of course, they didn’t worry about those investors not claiming deductions.
Having to pay tax is not the end of the world, of course. It means you are earning money.
With the ATO focused on Airbnb income, you should focus on deductions
What Airbnb hosts now need to do is look at all the tax deductions they can claim against that income. With a standard rental property, there are council rates, perhaps interest payments, water rates and maintenance. With an Airbnb property, you can possibly add to that cleaning and laundry fees, the cost of provisions supplied to guests, electricity, internet etc.
And what is the tax deduction for Airbnb properties that everyone forgets?
Depreciation. And who should you talk to about getting a Depreciation Schedule for your AirBNB? Depreciator have produced well over 150,000 Depreciation Schedules and are experienced in short-term rents like Airbnb. You can order a Depreciation Schedule here and get a discount.
Depreciation deductions aren’t just for new properties
Depending on the age of the property and whether it has had any renovations, you might be able to claim depreciation deductions on building works. You might also be able to claim depreciation on Assets, things like: appliances, carpet, air con.
Furnishing your Airbnb can be costly, but may mean a much larger tax deduction
And of course, there is the furniture your Airbnb guests use. You might be able to claim depreciation on that – especially if you have bought new furniture for guests. You need to keep good records of everything related to the operation of your Airbnb.
In many Airbnbs there is a mix of furniture that can be claimed and furniture that can’t be claimed. The best way to avoid issues is to speak with a quantity surveying firm experienced in holiday homes like Depreciator. They’ll know the right questions to ask to ensure your claim is maximised and correct.
Just renting a room or two?
If you are renting out a few rooms in your house as an Airbnb, you still need to declare the income. Your accountant will advise you on what proportion of council rates, interest payments, depreciation etc you can claim.
CGT implications from Airbnbs
Be aware, though, that if you start renting out part of your house as an Airbnb you may lose your CGT exemption. Your accountant will explain the consequences of that, but one thing you should do is get a market valuation of the property at the time you started to rent it out. Tuck that valuation away because it might be useful down the track when your accountant calculates your CGT.
Call us on 1300 660033 if you want to have a chat about your Airbnb or make an online enquiry here. Maybe ask to speak to Scott in the office – he has two Airbnbs and was one of the first hosts in Sydney.