Airbnb and the ATO

Lots of info online about the ATO cracking down on owners who don't pay tax on their Airbnb earnings but can find very few if any stories online of people who have been caught not paying tax by the ATO.
Why?
Is it in the too hard basket or is the ATO just using scare tactics and not bothering
to chase up the maybe thousands of people who don't pay tax?
Heard a rumor that it if it is less than 10K it can be classed as a hobby?.
So why are there not more stories onliner of people who have been caught out by the ATO.?
Anybody on this site been caught out?

 

Why be caught out when you can just be legit and declare it

 

If you rent out a area in your home as a Air B&B
doesn't that make your PPR eligible for land tax ???

 

And CGT?

 

is that even legal/possible becoming hybrid PPOR and Investment which means claiming the tax benefit for investment while living in the premise? Who will check where you live?

 

not in NSW.

 

Last I looked, 5k or less may be classed as a hobby but AirBnb would likely be recognised as being run to gain profit so would likely fall under a business for tax purposes. It's not worth getting it wrong, check with the ATO and/or your tax advisor.

 

People like the feeling of knowing there beating the system or getting something for nothing

 

It's sooo hard being a legit adult in one of the best countries which is helped by people paying tax

It's shooting yourself in the foot when the govt allows negative gearing. If you don't declare the income then you can't claim all the running costs, depreciation and other miscellaneous expenses.

 

Renting part of your property is NEVER classed as a hobby. A hobby relates to personal interests and activities ie pottery, art etc.

Renting is income. So its assessable. And if there is an assessable amount there may be costs incurred. Whether or not profit is aimed for means nil

 

I have had a few enquiries through PC from a few affected. Strangely they all argue they were not doing it for income. I spend first five minutes explaining why they are wrong and it IS income. Their opinion is always wrong and follows the view that they dont want to pay tax. Its why I believe CGT abuse is rampant.

Its part of the ATOeducation campaign. But when they identify omitted income they do purse with a "You may need to amend your return letter"....ATO letter says - $XXXX is undeclared. If we dont hear from you within 28 days we will amend. etc It lists possible income from a range of sites for past three years.

As I explain, you probably have expenses you can deduct. When thats done its often far less of a concern. Maybe even a loss.

So if you declare it you claim deductions. If you allow ATO to amend they wont know the expenses. So keep records and declare income and claim deductions.

Same with other online services like Uber, delivery apps etc.

 

Is anyone doing airbnb purely for tax deductions with their PPOR?

I can't understand why/how in a suburb house median of $1.1m, people can rent out 1 bedroom for $14 - $40 a night, average price not special last minute deals.

Or places with very little occupancy because the price is too high.

Is this simply a way to reduce/claim some PPOR interest as tax deductions?

 

Who can tell?

But they may get a big surprise when they go to sell and get a Capital Gains Tax bill from the ATO.

Assuming, of course, that the market doesn't tank in the future, and their CGT bill is 2c (then rounded down to zero...)

 

The first used to produce income rule would suggest otherwise.

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.192 Special rule for first use to produce income

 

...so if you rented out a room in your PPOR, the "first used to produce income rule/" would commence when the tenant started paying rent. What about if the tenant were to leave and the room once again was used as part of the PPOR (with no intention of releasing)? Is CGT calculated on a pro rata amount of the time it was rented out for?

 

The general rule for apportioning the main residence exemption is to make adjustments on the basis of floor area in a way similar to the calculation of proportionate interest or rent deductions, but also taking into account the period of income-producing use. However in some cases, a more appropriate basis for apportionment may be available (TD 1999/66).

 

A good example of this "other basis" could occur for a GF installed in the yard that is rented while the house is main residence which will arise when its rented (and later also be used for CGT) . The area of the home will have no bearing and would be incorrect to use. Instead it may be necessary to consider several matters
- % of area of total land for costs such as rates
- Reasonable apportioning for some direct costs eg water, internet, electricity etc
- Amount of the property insurance that relates to the GF dwelling eg the extra cost of that insurance
- proportion of the "cost" that relates to the GF portion and the home and its land propeortion (a valuer may need to assist that). This is commonly needed for apportioning interest on the original house and land for the land used for the GF.

These matters need consideration far earlier than when its CGT time

 

We were audited by the ATO and had a airbnb property in the mix. The ATO auditor didn't have a clue, had to explain to him personal use % as to why we weren't claiming 100% of the costs.

In any case it was a horrible process, took about 3 years to be resolved (the ATO auditor was over ruled).