How does CGT work for Airbnb rental properties?

Airbnb rentals are treated uniquely when it comes down to Capital Gains Tax (CGT) and Income Tax.

There are two different ways that you can rent out your house using Airbnb.

1. You can either rent out just one spare bedroom, or
2. You can rent out your whole house.

Income tax for Airbnb rentals.

From an income tax perspective, all of your income from your Airbnb needs to be included in your tax return.

If you’re renting out just one room, you will need to apportion the expenses. However, if you’re renting out the whole house, then it is pretty much treated like a normal rental property where you can claim all of the associated expenses.

So, calculating your expenses for income tax may take some additional time and effort, especially if you are only renting a portion of the home.

CGT for Airbnb rentals.

The biggest difference to discuss is related to CGT.

If you rent out your whole house via Airbnb or just via an estate agent, you do have the ability to claim a six-year exception from capital gains tax. This means that you can move out of the property, not live there for up to six years, and not have to pay CGT.

That’s very different to if you just rent out one room. In this case, you cannot get the six-year exemption on that room because you are still living in the property. Not living in the property is one of the criteria to be able to apply the exemption.

This then means that if you sell the property that you have been renting out the spare room of on Airbnb, you will have capital gains tax consequences. There will be some complex calculations that need to be done in order to ensure you are not paying too much capital gains tax.

Keep your records to assist with minimising CGT.

Obviously, it is extremely important that you keep very detailed records to make sure we can minimise the amount of CGT you need to pay.

If you come and chat to your property tax team, our tax champions can suggest the best strategies moving forward. Not only will we ensure that you are meeting your tax obligations, but also that you are saving as much cash as possible.