Income tax consequences of sharing your home
Homeowners can share their homes in a range of ways – you might have an agreement to rent out a room, offer short stays through a platform like Airbnb, accept money from a friend who sometimes needs a temporary place to stay, or receive board from family members such as university-age children.
Some of these situations will affect your assessable income for tax purposes and what expenses you can claim at tax time, so it’s important to keep records and know what you need to declare.
This article focuses on immediate tax concerns only.
Potential impacts on future capital gains tax consequences when you sell your home and any Centrelink benefits should also be considered.
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Rental income and expenses
Whether you rent out your whole home or just a room or granny flat, when it comes to lodging your tax return you’ll need to declare the rent you receive as income.
Rent and associated amounts that you receive (such as bond money or booking cancellation fees) are assessable income no matter the arrangement length, from a single-night Airbnb booking to an ongoing rental agreement.
You can claim immediate deductions for some expenses related to rental income, including costs for advertising to potential tenants, carrying out repairs and maintenance, and purchasing assets worth up to a certain value for the rental property.
Other deductions (e.g. for depreciating assets) need to be claimed over time.
It’s important to note that rental expenses can only be claimed for periods when your home is rented out or genuinely available for rent.
In addition, if you only rent out only a part of your home, then only expenses relating to the part that you rent out are deductible. Expenses (for example, interest on a loan used to buy the property) are usually apportioned or pro-rated on a floor area basis.
Family or domestic arrangements
Where family members or friends who stay in your home pay you board and lodging to cover the costs of their food and accommodation, this is generally considered a “domestic arrangement” rather than a rental arrangement, so the payments you receive don’t need to be declared as assessable income on your tax return.
Because of this, you also can’t claim tax deductions for expenses related to having the friend or family member staying in your home.
Take care, though: if you enter into a home-sharing arrangement with friends or family where you intend to make a profit, or one that’s otherwise generally consistent with an ordinary commercial tenancy agreement, simply calling the payments “board and lodging” isn’t enough to avoid the tax implications of receiving rental income.
It’s best to seek professional advice if you’re unsure about how the ATO might view your particular situation.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.