First Home Owner and AirBnb renting

Hey all,

I have bought my first property as a First Home Owner. Is there is any implications for doing short periods AirBnb on the property?

Just wondering cause I'm not sure if we should make any money on the property considering that is not an investment property? Could this impact anything in regards to the FHOG and Capital Gain Tax exemption when selling it in the future?

Thanks,

 

Yes there are. It will be subject to CGT

 

@Terry_w ,

Do you mean paying CGT in the short terms on AirBnb? - I agree.

What about in the future if when I sell the property? Would it be CGT exempted on the profit still cause it's my first home? The "primary residence exemption".

Thanks,

 

no because it was income producing

 

No. Certainly not. Only a %. You may need to consider time and also availability. Being vacant doesnt make it exempt if the room is listed and available.

Income tax will apply to short stay rental income. If you rent more than one room also consider the implcations for any land tax exemption of the principal place of residence. A % of some ownership costs may be deductible and there may be direct costs incurred (eg Airbnb fees). One mistake I see commonly with shortstay rents is assuming that if the occupany pays a cleaning fee of $80 that you can claim that as a deduction as well. No you can only claim actual laundry and cleaning costs. Div 40 depceciation cant be claimed other than for brand new assets acquired and solely and exclsuively used by the short stay occupants eg a TV in that room.

Froma CGT perspective when you sell, the main residnece exemption doesnt apply in full to such a property. This varies with e ch taxpayers case and psecific tax guidance may be wise.

Also consider s118-192 the "special rule" for CGT. If the home was recently acquired and cost say $650K and you also paid duty and legals of say $32K then the costbase is $682K. However s118-192 imposes a costbase reset to amrket value. That could be $650K. So the total gain subject to a portion that is taxable may be higher. BUT. 3rd element costs may assista nd it would also be wise to consider personal tax advice on your specific circumstances.

Tip : You cant use the CGT absence rule for the portion of you home as you arent "absent". And if you did become absent its possible the earlier short stay % remains non-exempt and ineleigible for the absence as well.

 

Thanks @Paul@PFI and @Terry_w !

So, just to make sure I understood correctly - generally speaking.

1 - If I rent my place for a few days on AirBnb (frequently), this short period gains will be part of my taxable income and will need to be deducted when I sell my place as I won't have 100% CGT benefit (cause it's my principal residency) - will have 100% - x days rented%. Is that correct?

2 - Would this impact my first home owner grants or should I wait 6/12 months before doing so?

Thanks again,

 

1. Not quite

 

I’m surprised that the absence rule isn’t applied. Have you guys seen the case of Swan v Uecker?

Basically it said that using a rental for airbnb is a lease and not a licence because it grants exclusive possession (for the short time).

I thought that might interact interestingly with the tax rule.

 

It depends on the circumstances.
If absent, i.e. moved out, it could apply. If not moved out it wouldn't.
I haven't seen that case, will have a read.

see my tip, in the meantime
Tax Tip 245: Can you use the 6 year rule with a short rental on Airbnb? Tax Tip 245: Can you use the 6 year rule with a short rental on Airbnb?

 

Yes I have read that one, It is from 2016. It could apply for tax if the who property is airbnb and the person is truely absent. But the ATO seem to take the view that you are not truely absent if you haven't moved out.

 

A Vic decision without impact on Commonwelath tax concerning lease or license which affect ability to "sublet" (Only a lease can be sublet). That decision would be very different if it was a mere room within a house.

Whole of dwelling vs a room are also both different CGT outcomes. A Airbnb of the whole dwelling may or may not be an absence where you do or dont move out and commnce another residence elsewhere. You cant be absent from one room and retain 100% exemption but it may be 75% exempt still. Apportionment will always apply

 

I reckon it does impact tax law on this issue though. The case concerns the airbnb-ing out of an entire premises.

The supreme court found that exclusive possession had been given to the airbnb guests, and therefore it was a sub-lease and not a sub-license.

I think the decision is actually quite flawed in that it was the wrong call to make, but my theory is that the consequence is that there is a much stronger argument to say that the full CGT exemption applies when airbnb-ing an entire premises.