Tax time is approaching and after renting out your home or spare room for a few days or months during the year whilst you holidayed or travelled for work, the big question pops up: to declare or not to declare?
Believe it or not, one of the most common questions I always get asked by our customers is “is my rental income taxable income?” I hope it doesn’t take you by surprise or disappoint you, the answer is very clear and I won’t dress it up. Rent received from the commercial letting of your home at a commercial rental, is clearly assessable income.
On the bright side, you are also entitled to claim losses and outgoings incurred in connection with your short term rental that will help you offset your tax liability. It is important for you to be aware of what expenses are allowed as an income tax deduction so that you can think ahead and strategize. Which allowable deductions can help you to upgrade your home, provide your guests with a more enjoyable experience and reduce your tax liability?
To give you a few examples of deductible expenses: Professional cleaning instead of DIY, professional management that will save you the DIY hassle, Insurances that will give you peace of mind, or investing in some upgrades that will enhance your guest experience.
Follow this link and download my short term rental worksheet to assess your net rental income or loss. The sheet includes an extensive list of deductible expenses.
All the expenses associated to your short term rental property during the rental period can be claimed. If you rent a room or only a section of the property, only the portion related to that space can be claimed as an income tax deduction. It is really, really important to keep records of both income and expenses related to your short term rental and it is recommended to keep them for five years from the lodgement of your tax return. Your records must be in English or translated and should include the following: Suppliers’ name, amount, description and date. Be aware that cash in hand is not deductible, no exceptions!
Remember, tax doesn’t need to be scary! Declaring your income won’t result in a large tax bill if you keep your accounts and records in order. With a little organisation you will have nothing to worry about. So go ahead and declare that spare income and remember that there is a lot of support available to help out. Look for the professional help of a tax accountant and make sure you support everything properly.
If you have any other questions that I didn’t cover on this post, please leave me a comment below and let me know.
If you are located in Sydney and require information or advice regarding hosting your home on the short term rental market, please contact our team at firstname.lastname@example.org
Sabrina Bethunin - Managing Director @ MadeComfy & Certified Practising Accountant (No. 9703172)
MadeComfy provides an end-to-end property management service, which means property owners don’t need to do a thing when they hand over their keys. MadeComfy makes the process of earning greater returns from short-term renting effortless, achieving up to 40% more than long-term rentals and self-managed Airbnb listings. Get in touch with us today to see how we can help!