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Airbnb – more than just a tax dodge?

By Alexandra Craig - 7 April 2015 37

hotel room

Airbnb is a business name that just keeps popping up. I’d heard a lot about it, but didn’t actually know any Canberrans who had used it or rented out their own place to travellers.

For those who have never heard of Airbnb, it’s a website for people to rent out their own homes or apartments to those who are looking for a place to stay. Airbnb has over 800,000 listings in 33,000 cities and 192 countries. Canberra currently has 270+ rentals available ranging from a $39 per night accommodation in Queanbeyan (however, one of the hosts is vegan and requires guests to be at least vegetarian and consumption of meat, fish, and eggs is not allowed), to a two-bedroom renovated terrace in Dickson for $300 per night (no rules about food listed!).

My first thought with Airbnb was along the lines of potential horror stories. What if the house is really, really dodgy and dirty?! What if you have to share your room with the owner’s pet iguana?! What if there’s a murderer in the closet?! The same horror thoughts extended to people who rent out their own place to travellers. What if all their stuff gets stolen?! What if guests go through their underwear drawer?! What if they leave a body in the bathroom?! I put out a call on social media asking for people’s experiences and an overwhelming majority said they had had really good experiences with Airbnb. Almost all said that as long as you do your research and thoroughly check the reviews then you’ll be fine. No one reported any dodgy houses, no iguanas and no murderers.

One person I spoke to did have a pretty bad story. She was in Rome and found that the apartments she had booked did not exist and neither did the street they were supposed to be on. She was especially unlucky as that particular week there were an extra four million people in Rome for the canonisation of two popes so her and her partner were pretty much homeless for a week.

I spoke to one person who rents out her one bedroom apartment in Canberra. She lives there the majority of the time, but when it’s booked out she stays at her partner’s house and takes personal items (photos, tax documents etc) with her. I can also report that she has had great guests so far, nothing has been stolen, no underwear has been sifted through, and no bodies left in the bathroom.

I’ve seen articles over the last few months debating whether Airbnb is a good thing or not, and if it will destroy the hotel industry. Unless there’s only one hotel in a city and an abundance of Airbnb rooms, I don’t think our hotel chains have anything to worry about. Accommodation can be scarce in Canberra, especially on parliamentary sitting weeks, so I think Airbnb is probably a good thing for our city. If all the hotels are booked out, Airbnb can step in and provide affordable accommodation.

However, some people make the argument that renting out your property via Airbnb is a way for owners to dodge tax by not declaring the cash they make from Airbnb. Others argue that it will destroy the economy as it’s not contributing to employment.

It’s definitely something that will be difficult to regulate and may rain on some parades once such rules and requirements are implemented, but in the meantime it appears that those who use it are raking in the benefits.

Have you ever stayed in Airbnb accommodation, or do you rent out your place?

What’s Your opinion?


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37 Responses to
Airbnb – more than just a tax dodge?
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dungfungus 10:22 am 22 Dec 15

It appears that Airbnb are not complying with regulations in Barcelona.
https://au.finance.yahoo.com/news/barcelona-city-hall-fines-airbnb-124244915.html
I think we have similar regulations in Canberra so over to Canberra regulators.

dungfungus 8:04 am 16 Apr 15

Madam Cholet said :

Never mind the tax laws…think about hosts being uninsured for your stay. Insurance companies will wise up to this and will ask questions about any claims involving third parties staying in your home.

http://news.domain.com.au/domain/real-estate-news/airbnb-in-the-spotlight-after-vicious-dog-attack-20150415-1ml946.html

That is another Uber moment (does private car CTP insurance cover paying passengers?)

Madam Cholet 6:53 pm 15 Apr 15

Never mind the tax laws…think about hosts being uninsured for your stay. Insurance companies will wise up to this and will ask questions about any claims involving third parties staying in your home.

http://news.domain.com.au/domain/real-estate-news/airbnb-in-the-spotlight-after-vicious-dog-attack-20150415-1ml946.html

dungfungus 10:02 pm 12 Apr 15

Aeek said :

Cracking down on individuals making some money from AirBnB while letting the conglomerates run free.

Did you really mean to say that?
According to Forbes http://www.forbes.com/sites/robertwood/2015/02/19/airbnb-pays-hotel-tax-but-are-you-paying-tax-on-airbnb-money-youd-better/ AirBnB is a $13 billion dollar enterprise which makes it a conglomerate in every way.
What is more is that it is an offshore company but they do pay taxes which is more than most individuals do.

Aeek 9:08 pm 11 Apr 15

Cracking down on individuals making some money from AirBnB while letting the conglomerates run free.

mr_wowtrousers 2:10 pm 11 Apr 15

I have used AirBNB in Kuala Lumpur, Tokyo and the Gold Coast and will be using it in Osaka in a couple of weeks. Wanted to do it in Hiroshima but surprisingly few places available there.

Haven’t had a bad experience yet. I did notice that the quality of Australian places on offer was quite below the asian ones I have stayed in. KL was a brand new serviced apartment next to Petronas Towers for $80 a night, Tokyo was a lovely bedsit with all mod-cons for about $110, my Osaka one is an amazing two bedder for about $140 in peak season, while Gold Coast was the bottom level of a house. Very serviceable but very 1970’s, no aircon etc. Lots of places on the GC didn’t have aircon, wi-fi etc.

Seems that the Australian attitude is much like most of service industry – “you want what? If you don’t like it, get lost.”

MarkN 3:55 pm 09 Apr 15

I did quite a bit of travelling overseas and used AirBnB 18 times all over the world.
The good news is that I got to meet many great people in private homes, Hostels and even hotels. The Hostels are my favourite now. After being worried about them they turned out to be great.
I did have two bad stories.
The second time I used AirBnB I was walking to the property and trying to get location details when the owner got annoyed because i didn’t meet her at the Train station and cancelled on me. I then spent hours on a Saturday night walking around Cambridge trying to find a hotel room, eventually asking a couple on the street who led me to a nice irish pub. next day I book via AirBnB my second option I’d rejected and it iwas so much better.
Next time the person cancelled on me as I was boarding my flight from London to Tokyo and I then spent hours walking around Ueno trying to find a hotel room (It was the weekend of cherry blossom season with 93% occupancy). Sometime after 10PM I found a small hotel with a tiny room but i didn’t care.
I got over it and every experience since has given me fantastic memories.
My advice…do AirBnB over hotels if you can just to give you a more real experience. My time in hotels was so lonely compared. Just maybe have a plan B.

ChrisinTurner 3:24 pm 09 Apr 15

Trying to avoid tax is risky as you are advertising on AirBNB that you are renting. The ATO are not stupid.

Last year we got caught up in the NYC AirBNB clampdown caused by a couple of people who had over 200 apartments each. AirBNB gave us credit of US$700 to help us find a last minute replacement, which we didn’t need to use. HouseStay is a another similar organisation. I have never had any real problems with these two companies, and we enjoy staying in the community and not in a hotel.

SanFrancisco has just signed an agreement with AirBNB on how it can operate there.

Argonaut 3:24 pm 09 Apr 15

I have used Air BnB as a traveller both internationally and domestically. Now it’s pretty much my go-to for travel, before checking sites like Wotif and Trip Advisor. All my experiences have been positive thus far, though the place I stayed in most recently was really out of desperation (I tried 15 other options first!) and I wouldn’t stay there again, not because it was really awful, it just wasn’t quite up to par – things like only one (tiny) saucepan in the kitchen, a rubbish mattress, and a hot water system that sounded like the souls of hell screaming. As I said, nothing dreadful, and given it wasn’t my first choice by a long shot it still wasn’t a bad experience.

I like the accountability of the review system – it’s sort of like ebay in that respect, both guests and hosts can be rated and reviewed. My preference is for entire properties rather than spare rooms though, and in this respect it’s no different to using a site like Stayz or similar – except you know what you’re in for, thanks again to the review process.

As for renting out our own spare room, well I would but my husband is not into having strangers in his house. I guess all the nightmare scenarios described above are what he imagines would happen! Also, I would feel compelled to be honest about the additional income, and I think we pay too much for rates in the ACT as it is, let alone adding the Land Tax component!

I will happily continue using Air BnB, though, even if I’m not hosting in return.

vintage123 1:47 pm 09 Apr 15

watto23 said :

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.

The facts of the matter are this, if you follow the ATO rules and abide to paying all associated fees such as land tax etc and declare all relevant income, scenarios such as room renting are not worth it. Especially if you sell in the short term, and during that short term the residence has increased in value. Because you will also have to pay the portion of CGT. More than likely its a bad investment mathematically. Unless you don’t declare the income, which is breaking the law. If you don’t pay land tax or declare income you may make it worthwhile, however hopefully you will be caught, in which case you will have to pay it back anyways. This is why savvy investors use a purpose built rental residence to invest. And it is set up as a loss, so that it is negative geared. That way you only need a small amount of money for a float purchase and the rest takes care of itself. If you have tenants for the first 12 months and you maintain your normal Job then you set. The money printing begins……and best of all, it’s all legal.

watto23 12:05 pm 09 Apr 15

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.

gazket 10:12 am 09 Apr 15

just another way the rich are shafting the tax system .

dungfungus 7:38 am 09 Apr 15

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.

dungfungus 7:25 am 09 Apr 15

Maya123 said :

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

Read #22.

Maya123 6:30 pm 08 Apr 15

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

Garfield 3:04 pm 08 Apr 15

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.

dungfungus 2:22 pm 08 Apr 15

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?

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