Tax on Airbnb.

I have these friends who told me they don't have to pay tax on Airbnb on their principal home because their accountant told them it was classed as a "hobby"and they were earning less than 10 k return for the year
Seems to be a loophole? They both work full time jobs. Is this correct?
.Seems strange to me.

 

Not an advice and not sure about AirBNB. But if it is a non systemic and business like then it is a hobby. The test is that it shouldn’t be carried as a business activity which includes items like advertising.

Based on that I would assume that it is still taxed. However if the revenue is low, and it is patchy (a few times a year) it would generally be classified as a hobby.

Australia in general is much much more generous than other countries. In France, every dollar is taxed.

 

I would respectfully suggest that your friends get the advice documented by their accountant with supporting case law and tax rulings behind it.

In particular the advice should refer to Tax Ruling 97/11.

I think that the act of letting your home on Air BNB is done only with the intention of generating rental income and is not a recreational pursuit.

Playing golf and winning 10k at the local club championships is a hobby. Painting landscapes and then having a random pay you for it is a hobby.

 

Uber is a hobby. There's nothing I;d rather be doing at 2am than driving around drunk smelly people.

 

ATO do a lot of cross matching. They have already stated they are checking Uber and Airbnb records to ensure income is declared. eBay has already been targeted.

So tell friend not to be surprised to get a curt letter from the ATO asking why income has not been declared.

Making and selling pottery mugs may be classed as a hobby. Renting out rooms is not.
Marg

 

Eventually they will get a “please explain” from ATO.

 

Hard to argue its a hobby.

However the offsetting costs on 10k. Portion of rates , insurance, electricity, interest, depreciation etc may mean there is not much profit left to be assessed on anyway.

 

Thanks members for your help . Very informative. Great help to other member in the same boat. It amazes me the number of people that rent a room out on Airbnb in their principle home are don't seem to be worried about the loss of capital gains.

 

you dont lose the main residence exemption from renting a room through AirBNB. the property becomes subject to CGT on a proportionate basis. area and time may be a reasonable allocation. would depend on circumstances.

with all the third element costs involved added to the cost base and time value of money it may well be worth it.

that same after tax income used today to pay down non deductible debt such as a main residence loan may result in tens of thousands in interest savings over 20 years. Over the same 20 years all those third element costs and the proportionate use will have whittled the CGT down considerably. Add to that a 50% discount and it may well be worth it.

Money today used to pay down non deductible debt today is a lot better than paying later on.

 

Pretty unlikely.