Your property as a potential AirBnB

airbnbKevin House, Partner

The latest hot part-time business is Airbnb. Property owners are finding it easy to use online accommodation marketplace services to generate some return from spare space, either a room or rooms in a house, or an available holiday home. The ease of using a system designed specifically for short letting and the resulting income are attracting more and more people to utilise the facility.

Comments from various parties inside the accommodation industry would indicate that some 7,000 plus Airbnb facilities are available and that it is not uncommon to generate $7,000 per annum as an average income.

By utilising Airbnb facilities, you become a landlord. Rental return, no matter how irregular or small, is income and therefore liable to tax. In accordance with usual taxation principles, costs incurred in producing the income are deductible. Where the income is generated from a separate stand alone property, the income and expenditure calculations are relatively simple. Where they become more complicated is where the use is mixed, such as a room used part of the time personally and part of the time for Airbnb. There need to be meticulous records kept of income and claims and the basis for any calculation. The bottom line is that the allocation of costs must be fair and reasonable and able to withstand scrutiny on audit.

Examples of possible deductible items are:

  • Rates
  • Water Rates
  • Insurance
  • Interest
  • Amenities such as electricity, gas, heating, Sky/Netflix, internet, and security
  • Cleaning / laundry costs
  • Soaps, detergents, tea, coffee, toilet paper and other consumables
  • Potential transport/vehicle.

A further complication occurs when the gross income from the activity exceeds $60,000 in any 12 month period or is expected to exceed $60,000 in any 12 month period. If the Airbnb arrangements constitute a serviced apartment (or similar) managed or operated by a third party for which services in addition to the supply of accommodation are provided, goods and services tax needs to be considered. At that level, there is a need to account for goods and services tax. While the level may seem high, high quality accommodation in sought after tourist areas could easily result in that level applying.

Complications include:

  • Charging GST on the rental as short term accommodation. Different calculations are needed if the letting exceeds 4 weeks and it was intended that would be the term at the outset
  • GST on de-registration or sale of the property
  • Possible GST apportionments required
  • Possible recoupment of GST paid when the property was acquired.

Other complicating factors which need to be considered are:

  • Whether insurance cover on the property remains valid
  • Safety matters such as fire extinguishers, evacuation procedure, emergency exit route, smoke alarms, and sprinkler systems.

Before you jump into your new Airbnb business, get advice on the downstream consequences to make sure you do not in the long term lose more than you gain.

The information contained in this paper is necessarily of a generalised nature and specific advice should be sought in relation to any particular situation. Further information and assistance in relation to this article can be gained by contacting senior commercial lawyer Kevin House.