Airbnb is a good income earner but what about the CGT?

House with coins image

Work with a tax agent to calculate the correct capital gain.

Airbnb can create extra income for you and your family, however this can cause some adverse tax consequences.

“First of all the income will need to be included in your tax return each year that you earn income from your property. However, a big potential down side is that if you use your principal place of residence for income producing activities you may be subject to capital gains tax when you sell on the income producing portion of your house.

“Think again if planning to leave out the income or capital gain from your house or room renting activities. The ATO data matching technology is improving every year and is starting to match data from the sharing economy with people’s tax returns.

“I suggest that Airbnb ‘landlords’ work with their tax agent to ensure that they correctly calculate the capital gain when use their house for Airbnb or other income earning activities in the house,” said Maria Dyson, Senior Financial Planner, Omniwealth.

Financial planning issues to consider when renting the spare room or granny flat:

  • Apportioning the deductible expenses associated with the income producing portion of the home.
  • The home mortgage – can you claim some of the interest costs?
  • For some clients it is more beneficial to rent out their home on an ongoing basis and for them to rent elsewhere. The home retains its main residence status for capital gains tax purposes for 6 years unless the client purchases another home. This can be a more efficient use of funds from a debt reduction tax minimisation perspective.

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