Although Airbnb is one of the more widely known facilitators connecting those with a room or part of their house to let with suitable applicants through an app or a website, the following advice also applies to anyone renting out part of their house whether for a short term or longer.

The following tax issues are relevant to those who:

  • own their own home
  • live in it full time; and
  • want to earn extra income by renting out a room other identifiable area

The major tax considerations are:

  • Income Tax
  • Capital gains tax
Income Tax – what can I claim?

Is the Rental income being charged on commercial terms?

Where the rental arrangement is at “arms-length” and thus the income is declared as taxable income, the following expenses can then be claimed.

  1. Expenses that are directly associated with the rented area – deductible in full.
  2. Expenses that relate to shared areas – apportionment required.
  3. Expenses that relate to the host’s private area only – not deductible.

Sheets and pillow for use in the rented room is one example of an expense that is directly associated with the rented area of the host’s home, and thus would be deductible in full.

Some examples of other expenses that may be deductible in full include:

  • commercial cleaning of the rented area
  • Coffee, tea, soaps etc provided for the renter
  • repairs and maintenance;
  • professional photography for the listing; and
  • host service fees
  • depreciation on furniture purchased for use in the rented room

Where there are expenses that relate to the entire property, apportionment is required. The ATO has indicated that floor space can be used as a general approach for apportioning expenses.

Some examples of expenses that relate to the entire property and thus may be deducted in this way include:

  • mortgage interest;
  • council rates;
  • utilities and insurance

Expenses that relate to shared areas can be apportioned based on access i.e. if a host and a renter have equal access the deductions could be apportioned 50/50.

Examples of expenses that relate to shared areas only include the following

  • depreciation on furniture and appliances locate