1. Do you pay tax on Airbnb income in Australia?

Yes. The ATO treats money from renting out all or part of your home, or another property, through a platform such as Airbnb as income you must declare. Its guidance on renting out all or part of your home covers rooms in the home you live in, a whole home and other properties you own.

For most hosts this is rental income, not business income. The ATO says it is rare for someone to be carrying on a business just because they rent out a property. Your Airbnb income is added to your other income and taxed at your marginal rate.

This guide covers what is specific to short stays. For the wider rules on rental property tax, including negative gearing and depreciation, see our guide to rental income tax in Australia.

2. What income you must declare

The ATO lists what to include. You declare:

• all income before fees and commissions are deducted, including any host or cleaning fees
• insurance payouts, such as compensation for damage caused by guests
• bonds or security deposits you become entitled to keep
• letting and booking fees you charge, including cancellation fees.

That means the figure to declare is the gross amount, not the payout that reaches your bank account. Use the platform name as the description for the income in your return.

The ATO gets data from the platforms

The ATO says it receives data from digital platforms operating in Australia to identify people earning income through the sharing economy. If what you declare does not match what the platforms report, expect questions.

3. What expenses you can claim

The ATO's list of common deductions for hosts includes:

• council rates
• interest on a loan for the property
• electricity, gas and water
• property insurance
• cleaning and maintenance, including a commercial cleaner
• fees or commission charged by the platform.

You can also claim other expenses that directly relate to earning the income, including repairs to damage caused by a paying guest. Our guide to Airbnb insurance in Australia covers the cover worth paying for.

3.1 Claiming the right portion

Most expenses can only be claimed in part. The ATO uses two methods, and some hosts need both:

• Time: the number of days in the year the property was rented out.
• Area: the part of the property used by guests, such as a bedroom plus a share of the common areas.

For example, if you rent out a whole home for 200 days of the year and live in it for the rest, about 200 out of 365 days of the council rates relate to renting. On rates of A$2,000, that is about A$1,096.

Expenses that only relate to guests, such as the platform's fees, can be claimed in full. Keep receipts and platform statements for everything you claim.

4. GST, capital gains tax and state levies

4.1 GST

The ATO says you don't need to pay GST on residential rent you earn. GST only comes into it if you carry on an enterprise renting out commercial residential premises, such as a commercial boarding house. A standard home or apartment let on Airbnb is residential.

4.2 Capital gains tax on your main residence

Your home is normally exempt from capital gains tax when you sell it. Renting it out can reduce that exemption. The ATO works out the taxable part using the floor area guests used and the number of days it earned income.

In the ATO's own example, a homeowner rented out a room for 1,857 of the 2,192 days he owned the home. Guests used 35% of the floor area once shared spaces were counted. On a gain of A$120,000, the taxable part was A$120,000 x 35% x (1,857 / 2,192), or about A$35,582, before the 50% discount for owning it more than 12 months.

An investment property that was never your home does not have the main residence exemption, so the full gain is taxable when you sell.

4.3 State levies

Victoria charges a short stay levy of 7.5% of the total booking fee on stays of fewer than 28 consecutive days. Platforms pay it on bookings made through them. Our guide to Victoria's short stay levy explains who pays and when.

5. Keeping it simple at tax time

Keep records all year

Download monthly statements from each platform, keep receipts for every expense, and keep a simple log of the days the property was rented, used by you, or empty. The ATO apportions expenses on these numbers, so a log saves guesswork.

Declare the gross figure

Declare income before fees are deducted, then claim the platform fees as an expense. Declaring only the payout understates your income. Our guide to Airbnb hosting fees in Australia shows what the platforms charge.

Get advice for your situation

How much tax you pay depends on your other income, how the property is owned and how it is used. An accountant can work out your position.

How a manager helps

A manager keeps booking statements, cleaning invoices and maintenance records in one place, which makes your return easier to prepare. See the Airbnb management in Australia page to find out how Houst works.

This article is general information based on ATO guidance, not tax advice. Speak to a registered tax agent about your own circumstances.