Airbnb and the ATO

Discussion in 'Airbnb & Short Term Letting' started by tilt10, 3rd Jun, 2018.

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  1. tilt10

    tilt10 Well-Known Member

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    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?
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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

    CowPat Well-Known Member

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

    bunkai Well-Known Member

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    And CGT?
     
  5. Ben John1

    Ben John1 Well-Known Member

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    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?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    not in NSW.
     
  7. hobartchic

    hobartchic Well-Known Member

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    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.
     
  8. lightbulbmoment

    lightbulbmoment Well-Known Member

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

    Westminster Tigress at Tiger Developments Business Member

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

    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.
     
  10. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    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
     
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  11. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    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.
     
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  12. evalord

    evalord Well-Known Member

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    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?
     
  13. Ted Varrick

    Ted Varrick Well-Known Member

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    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...)
     
  14. geoffw

    geoffw Moderator Staff Member

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    I've been told that the extra CGT which has to be paid is calculated on the CG for the whole time you've held the asset, not just pro rata from the time you start claiming deductions. So even if the property tanks from now on, there could still be a large CGT bill payable.
     
  15. Mike A

    Mike A Accountant Business Member

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    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
     
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  16. geoffw

    geoffw Moderator Staff Member

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    Mike A likes this.