To Rent Or Not To Rent?

Whether you want to pay down your credit card or save for a dream vacation we could all use a little extra cash. Online platforms such as Airbnb & Stayz are two of the most popular ways to rent a spare room without a long-term commitment. But many don’t realise the effects and benefits when it comes to tax time.

Some tax advantages include:

  • You can claim internet and phone costs.
  • Water, power and council rates.
  • Upkeep and repairs.
  • Depreciation of furniture and equipment.
  • Interest on your mortgage.

If you are renting using an online platform the ATO can track this income easily. You will need to save your receipts so you can substantiate your deductible claims against the rental income.

Some tax disadvantages include:

When using your own home to produce income it has tax consequences. Your main residence is generally exempt from capital gains tax. However, if you have used your property or portion of it such as renting out a room. You will no longer be eligible for the full main residence exemption on eventual sale. You will lose a portion of the profit from the sale of your main residence based on the floor area of the room rented out and the length of time it was rented.

There are some circumstances where you won’t lose the capital gains tax main residence exemption. For example, when you completely move out of your main residence to live in another home for up to 6 years.

As part of their ‘broad random enquiry program’ the ATO auditors found that out of the 300 audits on rental property tax deduction claims ‘9 out of 10’ reviewed returns had errors. Such errors included interest claims on loans being overstated by private portions. Also, incorrect claims for holiday homes.

The ATO’s next area of focus will be rental income and related deductions therefore it is extremely important that when claiming any deduction that you have receipts.

As tax agents we can advise on the correct deductions, but it is important that when you are signing your tax returns in the event of an audit you can substantiate your claim.

Written for you by Amanda Bonavita





The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

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