A number of investors are generating income from renting residential investment properties exclusively on sharing services rather than traditional longer-term rental arrangements – rental income can be higher for short-term accommodation and the host has the capacity to increase prices easily for peak periods. Just a quick look at properties available around the world on sharing sites shows how quickly this style of arrangement has attracted investors, particularly where the property is located in high demand tourist areas.
But what are the tax implications if you own one or multiple investment properties and rent them on a sharing service? Firstly, it’s important to get good advice as this can be a complex area and being on the wrong side of the tax law can have significant implications. For example, if the ATO deems you to be providing commercial residential accommodation, they will treat your activities in the same way as hotels and motels meaning that the rent could trigger a GST liability for you (although you might be able to claim back some GST credits on expenses you pay). Broadly, accommodation falling into this category would have multiple occupancies such as a block of apartments, central management of the properties, and provide services to the guests beyond the accommodation such as breakfast or room servicing.
Before becoming a host, as a minimum, it’s important to understand the tax implications of your arrangement, check if there are council restrictions, and ensure that you have the right insurance in place.
Sharing property owned by your SMSF
Can your SMSF become a host and rent residential property on sites such as Airbnb? this could also be subject to some strict rules which apply to losses made from business activities.
Other sharing economy services
There are a wide range of other services that could potentially be provided through the sharing economy. This could include using your ute or other commercial vehicle to provide removal or delivery services.
In each case, it is important to work through the basic rules to determine whether the activities amount to a business, the income and deductions that need to be declared on your tax return, the records that need to be kept in order to support the claims that are being made, as well as the ABN and GST issues that go along with providing services.
This is an area that is clearly on the ATO’s radar so it is important to ensure that all relevant tax obligations are identified and are being managed appropriately.
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