Australian Taxes and Airbnb
An important thing to remember if you are considering being a part of the shared economy by renting out a portion of your home or apartment for use as an Airbnb is to make sure that you understand what you are responsible for paying in taxes at the end of the year. It is strongly recommended that you do not simply treat this additional income as free spending money and spend it all because all additional income needs to be declared on your tax forms and failure to disclose additional revenue, such as that from rent, can lead to large legal penalties.
First thing you should do is document everything. An important part of being able to know what you owe when your taxes come due is knowing how much your deductions will add up to. Documenting everything that went into your Airbnb can help you figure out what deductions you are entitled to at the end of the year. As long as you keep accurate and thorough records of electrical use, water use, internet use, and other aspects like that, they’re potentially deductible items that can affect your taxes at the end of the year.
The next big question is how much should you potentially set aside for your taxes from your Airbnb rental? A good rule of thumb is to play it safe and set aside as much as 30 to 40% of all your rental profits as you may need to pay up to that amount in taxes depending on how much income your property generated over the year. It may seem high, but remember that these are things you need to factor into your original listing price so you can determine whether your Airbnb property is going to be profitable to you.
Capital gains taxes are not just for the rich and powerful anymore – they can potentially apply to your Airbnb rental depending on the circumstances. This is one of the most important things for you to note as it can have a major consequence on your home or apartment if and when you decide to sell. If your home, or even a portion of your home, was utilized for renting then you could have to pay a capital gains tax on it. Capital gains taxes are not traditionally applied to homes that were only used for living in.
When in doubt, talk to the tax man. There are professionals all over Australia who can assist you in figuring out the legal jargon, learning what you can deduct, informing you of your legal duty, and determining how much you really owe in taxes. By meeting with these individual tax accountants or consultants, you can potentially save yourself thousands of dollars every year in taxes that you end up not having to pay. They will also help ensure that you are paying taxes based on your legal requirements. Keeping everything legal and above board is an essential part of having an Airbnb and essential part of your civic duty.
To learn more about Airbnb property management, check out our other helpful tips on kozyguru.com.