Airbnb - more than just a tax dodge?

gazket said :

just another way the rich are shafting the tax system .

Except that airBnB is rarely the rich shafting the system. I’m all in favour of clamping down on airBnB, but only if the rules are consistent with rental properties in general. Also I find the rules around CGT to be ridiculous. When I first bought my house I wanted to rent a room out, but the complexity of doing so and the fact that CGT exemption would disappear made it more difficult. Many people of course still do this without reporting income from the room being rented. No different to airBnB in that sense. but the laws are ridiculous in that sense and you’d be far better off renting your whole house out and renting another place for yourself. If car pooling makes sense, so does renting out vacant rooms in your house.

just another way the rich are shafting the tax system .

Garfield said :

watto23 said :

dungfungus said :

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

….and attract Land Tax.

Not an issue in the ACT, because in effect we all will be paying “Land Tax”. I have noted many economists applauding our move away from stamp duties and towards a “Land tax” aka rates.

This is also in reply to Dungfungus’ question.

In the ACT, Rates on residential properties now include what is effectively a land tax component, but a residential rental property attracts the two separate bills from the ACT government of Land Tax and Rates. Commercial properties in the ACT no longer receive a separate Land Tax bill as it has been scrapped, but they now receive much higher Rates notices.

Thanks for clarifying that. Just my luck that I sold my rented commercial property in 2011 the year before Land Tax was abolished.
The ACT Revenue website is quite clear about the situation with Land Tax and residential properties:
“If you own a residential property that is rented, you are liable for land tax on that property. This also applies to boarding houses and multiple dwellings, including dual occupancies and granny flats that are rented. Rent can include cash, services or any other valuable consideration earned in respect of a property for which any form of tenancy arrangement exists.”
The ACT Government is advised by utility and other service providers when there is a change of user at an address. This triggers the Land Tax process. The AEC acts on the same information. So much for privacy.
There is little chance of the government claiming Land Tax on these short term arrangements.

Maya123 said :

Surely these properties would be liable for Land Tax in the ACT.

Read #22.

Surely these properties would be liable for Land Tax in the ACT.

watto23 said :

dungfungus said :

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

….and attract Land Tax.

Not an issue in the ACT, because in effect we all will be paying “Land Tax”. I have noted many economists applauding our move away from stamp duties and towards a “Land tax” aka rates.

This is also in reply to Dungfungus’ question.

In the ACT, Rates on residential properties now include what is effectively a land tax component, but a residential rental property attracts the two separate bills from the ACT government of Land Tax and Rates. Commercial properties in the ACT no longer receive a separate Land Tax bill as it has been scrapped, but they now receive much higher Rates notices.

watto23 said :

dungfungus said :

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

….and attract Land Tax.

Not an issue in the ACT, because in effect we all will be paying “Land Tax”. I have noted many economists applauding our move away from stamp duties and towards a “Land tax” aka rates.

But Land Tax will still be payable separately on commercial properties and residential rental properties, won’t it?

But we still pay both stamp duty and land tax when purchasing a home.

dungfungus said :

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

….and attract Land Tax.

Not an issue in the ACT, because in effect we all will be paying “Land Tax”. I have noted many economists applauding our move away from stamp duties and towards a “Land tax” aka rates.

I have used Airbnb in the US and find it a wonderful alternative to commercial accommodation. But as with all things your have to do your research. The types of accommodation that can be offered varies greatly, from someones spare room to a whole house.

Airbnb itself provides members with many tips and plenty of advice on how to operate as a host and how to be a good guest. Airbnb also provides advice about setting up your place and advises potential hosts to research the tax and renting laws in their area.

So to my mind, if in Canberra you are falling foul of regulatory laws it is because you either haven’t done your homework, you are ignorant or deliberately pulling a swifty.

My partner is registered on Airbnb (in NSW) and declares that income as part of his business.

Airbnb advertises that it wishes to create a community of hosts and guest and promotes its services that way. Some hosts take a more hands off approach though. So ultimately as hosts, travellors and guests, you need to decide what kind of experience you want from Airbnb, read the hosts information and the reviews.
And be considerate guests.

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

….and attract Land Tax.

Taxable income is taxable income whether you have got away with it so far or not.

The ATO usually gets a tip off from an unhappy neighbour who does not like your side business.

The income does affect your residential Capital Gains Tax free status and the CGT may far outweigh any gains from letting:

https://www.ato.gov.au/General/Property/Your-home/Renting-out-part-or-all-of-your-home/

This is not an issue in the USA where you pay CGT exemption on your residential home, but the Government gives you a tax break on your mortgage, thus making sub-letting a profitable option.

Only an accountant expert in these matters can tell you exactly your obligations.

“She’ll be right!” does not apply in Australian law.

vintage123 said :

I go back to the editors comment “it is definitely something that will be difficult to regulate and may rain on some parades once implemented”.
Is the editor suggesting the taxation framework is not currently in place?
Secondly is the editor suggesting the canberian whom stays with her partner and occasionally rents out her apartment is not declaring this income?

Not suggesting either of these things.

I said it is definitely something that will be difficult to regulate because it will be. As far as I’m aware, no one has “been done” for making money through Airbnb. I also know someone who rents out their house privately but not through Airbnb, there’s no public listing of their rental at all. How can that be regulated?

As for the person I referenced in my article, I didn’t ask them what they do at tax time. That’s not my business.

vintage123 said :

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

Your primary residence is only considered tax free if it is not generating any income. As soon as it does, such as in the example of renting out a room then that income is required to be declared at taxed. I am not saying it can’t be done, it can, you just need to follow the rules which is determining the percentage of expenses applicable to the investment minus the income or vice versa and declare the delta.

Oh and the most important point I forgot to mention, is if you do rent out a room and claim expenses this percentage of income production is no longer exempt from capital gains tax. So if you have a 2 bedroom unit and you live in one bedroom and rent the other out and the property increases in value by 100k then 50k of this will be subject to capital gains tax if you were to sell it. Minus any CGT concessions you may be entitled to. So be careful to ensure the benefit of the taxed portion of income offsets any loss in capital growth tax.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

That is the thing, i’m in total agreeance that its breaking the law, but the laws benefit some and not others, like those who can afford a negatively geared property, yet those same benefits are not there for someone who rents part of their home out. IMO if you live in the home it should be CGT exempt, or we just make no property CGT exempt. Renting out rooms, eases the pressure on the market. Sometimes this is a good thing.
The whole tax system needs a revamp, but no political party has the balls or will to do it, despite what they might say.

rubaiyat said :

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

Your primary residence is only considered tax free if it is not generating any income. As soon as it does, such as in the example of renting out a room then that income is required to be declared at taxed. I am not saying it can’t be done, it can, you just need to follow the rules which is determining the percentage of expenses applicable to the investment minus the income or vice versa and declare the delta.

I go back to the editors comment “it is definitely something that will be difficult to regulate and may rain on some parades once implemented”.
Is the editor suggesting the taxation framework is not currently in place?
Secondly is the editor suggesting the canberian whom stays with her partner and occasionally rents out her apartment is not declaring this income?

Vintage 123,

Don’t worry – The ATO are onto these “sharing economy” websites. Landlords still have to advertise their properties, and the ATO screen swipes the data from gumtree, stays & airbnb to pick up the tax dodgers.

The folks I stayed with in Belgium were paying their yearly mortgage on the property inside a month. It’s was just outside Bruges. It was great – the landlord could not have been more helpful & respectful to us, and we are still in contact to this day. I love the personal touch we got, and I’ll definitely use it again. I’ll only use a hotel as a last resort now. If you do your research and stay away from the rough parts of towns and the bottom end of the market, you’ll get an experience no hotel can offer ( maybe a 5 star place could be an exception), for half the price….

As someone who owns an investment property which happens to be a holiday let down the Coast for which we pay handsomely (and of course get to use ourselves), I’d be concerned about the insurance angle, particularly if you ship out while your guests are there. You could need public liability insurance and some kind of ‘landlord’ type insurance for starters. Wouldn’t fancy your chances if for instance a light fitting happened to fall on you at a critical time and ruined your holiday. The Airbnb statement on what they provide says their own cover (they say it’s not insurance) does not cover ‘cash and securities, pets, personal liability, shared or common areas’

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

vintage123 said :

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

The craziness of Australia’s tax system is that that could compromise the tax-free status of your family home.

If you are earning income and not declaring it then you are breaking the tax law. It’s very clearly stated and explained on the ATO webpage. It makes no difference if it is your primary residence and your renting out a room, if someone is paying for it then you are required to declare it as taxable income. As such you are then entitled to claim a percentage of the applicable expenses to reduce the tax burden.

I don’t really have an issue with airBnB as a tax dodge. If it helps people make ends meet and pay bills and the mortgage, then it helps Australia and the government. Given its only one more step to running a negatively geared property and paying no tax on it, or your income and for now thats ok, I can’t see how anyone could accuse airBnB as a tax dodge in Australia.

Those that don’t like it tend to have a general distrust in people. You can worry about all sort of things, most of which could happen with any property you book. As a worldy traveller, I’ve not used airBnB much, or couchsurfed much either, but the best people you meet are often the friendly owners of said place. Often just like a guesthouse only better. I stayed in a guys apartment in Bucharest. From the outside it was a drab grey concrete behemoth. Inside he’d done it up for guests who got the 2 bedrooms, one a private double the other a 4 bed dorm. The owner was extremely friendly, cooked you an omelette for breakfast even for those early departures. He was just an awesome guy. Then I found out he’d created a small room inside what was essentially an extended wardrobe, that is where he slept and lived to provide guests his 2 rooms. He didn’t seem to mind, it meant he earned money to live and he said he earned enough to buy luxuries like a laptop and camera.

I stayed in a guesthouse in Mostar. Basically he bought a run down bullet ridden house and started to do it up. The thing was while it was still under construction (and still is according to his facebook photos) the owner was what made the stay special. You don’t get that with big hotels.

I think making uber and airbnb operators pay tax is all just a diversion away from the real issue of who is actually paying tax in this country. I’m all in favour of removing all deductions from tax and then lowering the rates everyone pays. There would be less tax dodging, everyone gets a tax cut as well, except those who already heavily reduce their tax.

Canberra should be a prime target for Air BnB as it is wildly over priced for what you get.

Generally I think it is good for tourism as it offers a different accommodation and experience, attracting people who might not bother including Canberra in their itinerary.

Various governments have been trying to curtail its use in the States and that may happen here as well under commercial pressure. It does seem unfair that the hotels in the USA have to pay a bed tax that the AirBnB people totally avoid, not exactly a level playing field, but then I consider the bed tax quite an affront.

Also the AirBnB owner doesn’t have their hand out constantly for tips, one of the most annoying aspects of US travel. I did cook for a couple though and they thought I was some kind of genius. I didn’t want to say it, but the USA is a food disaster zone and it got me out eating their ‘meals’.

We have been renting out our one bedroom apartment in the inner south since the beginning of the year.

We expected to get one or two bookings per month, but the response has been way greater than what we anticipated. We are pretty much booked out until the end of May.

We have only had positive experiences with guests – I think people are more inclined to treat a place well if they know it is someone’s home (some guests even run the dishwasher, vaccuum and wash/dry their own sheets before they leave!). As in Alexandra’s example above, we don’t keep personal or valuable items in the apartment, but we do have nice furniture and furnishings that haven’t been damaged – and I don’t worry that they will be.

It’s hard to believe that Canberra’s hotels aren’t feeling the impact. It is hard to make the case for staying in a hotel room when – for the same price – you can have an entire apartment or home in a similar location. I wouldn’t be surprised if the hotel groups start calling for tighter regulations instead of innovating, like how taxi drivers are doing with Uber.

We generally only stay at airbnb places when we travel now too.

I have used Airbnb a couple of years ago. We stayed in a hotel in Union Square for two weeks in NYC, Stayed a week in Vancouver, A few days in Seattle, Portland, San Francisco and LA. During these visits we sometimes had the whole place to ourselves or decided to stay in a spare room in the owners house whilst they were there. We did this to save money firstly, but to also give us the ‘locals’ perspective of the city rather than a hotel or hostel. The instances where we were sharing the house with the owner was when we really got a good sense for the city. We went to their bars, cafes and restaurants. I am still in touch with these people a few years on.

I have gone on to use Airbnb for my default accommodation source, rather than going to hotels websites etc. In Australia I have stayed in a number of unique houses and apartments in major cities and country towns.

Those people that have had a bad experience with places that aren’t there or places that are really dirty – it is all buyer beware, but at the same time you have to be smart about it. Research the person, read their feedback, talk to them before booking to get a feel for them and the area. If you treat it just like a hotel booking system then you will eventually get burnt by it.

Once I have a new place, I will no doubt be putting up a room for airbnb use. To meet new people and get the chance to show outsiders what Canberra means to me.

$275 a night is a bit much, even for Melbourne. We usually get a one bedroom apartment right where we want to be in the heart of Melbourne for about $100. Last stay was right on the Swanston St tram line in Carlton, two blocks from Lygon Street or a pleasant walk to Victoria Markets and the city.

We used Air BnB when we toured through America. It was nice sharing a house with local people, by coincidence mostly gay couples, but the accommodation varied, the weirdest being L.A. which was a converted garage out in Culver City, with no window. It was only a block and a half from the light rail so fairly convenient.

Negotiating with the owners and trying to get them to respond in time to co-ordinate with transport arrangements was testing.

One thing I like about the US Air BnB websites is the photo tour of the areas so you get a better idea of location. Last I looked on the Australian sites they didn’t have that.

We recently used Airbnb for the first time over the grand prix weekend in Melbourne. Hotels always jack up their prices by ridiculous amounts so we got a bargain in comparison with a 2 bedroom, 3 storey apartment in St Kilda for $275 a night only 15 minutes walk from our grand stand seats.

The host was excellent and, for a fee, also picked us up and dropped us off from the airport (so taxi drivers can complain too). She showed us around the apartment, gave us some tips on local shopping and dining and left us to ourselves. She sent a text each day to see how we were getting on and if everything was in order.

Overall it was a very pleasant experience and I’d stay there again. I think you do indeed need to do your research and check the reviews but, as long as they check out, it can be a great experience.