Time to read : 6 Minutes
Accommodation rental sites like Airbnb and Stayz could be a good way to make extra money, regardless of whether you’re listing a spare room, granny flat, or an investment property.
As a landlord, you can set the price and conditions. Sounds fairly straightforward in theory but… what about the tax implications? And it’s a question we often get asked at H&R Block.
So here’s my guide to what you can claim and how much is tax deductible on holiday rental properties.
Rental income and your tax return
The income that you get from your rent will be assessable, in other words be taxed, given that the property is advertised to the public online.
The basics of claiming rental expenses
If you’re a landlord for a rental property with assessable income, you may be entitled to tax deductions for expenses incurred. These expenses fall into three categories:
Expenses directly associated with the rented area can be deducted in full.
Expenses related to shared areas need to be apportioned.
Expenses related to the host’s private area only cannot be deducted.
What expenses may be fully deductible?
depreciation of furniture used in the rented room
commercial cleaning of the rented area
repairs and maintenance
food, such as breakfast provisions, made available to the guest
professional photography for the listing
service fees and commissions charged by the rental platform.
What about expenses relating to the entire property?
Where there are expenses that relate to the entire property, you’ll need to apply the costs based on the rented area and not include the area you use privately. Known as ‘cost apportioning’, it’s commonly done by looking at the floor area used for renting compared to the total floor area of the property.
Some examples of expenses that relate to the entire property that may be apportioned include:
mortgage interest or rent
council rates
utilities
insurance.
Expenses relating to shared areas
Expenses that relate to shared areas can be apportioned based on access. So, if the renter and the landlord both have equal access to, say, the lounge and the kitchen, you can deduct 50% of these expenses.
Some examples of expenses that relate to shared areas include:
depreciation on furniture and appliances located in shared areas (such as sofas, TV’s, kitchen equipment)
internet, phone and cable TV costs.
What happens if rental expenses are more than rental income?
If rental expenses exceed rental income, you’ll make a loss. The excess of rental expenses over rental income (which is the loss) could be claimed against your other income such as salary.
Be aware: the ATO may argue that you are charging a non-commercial rate of rent (ie lower than market rate). They could then limit your rental deductions so they are not more than the rental income you received.
Where you rent out a whole property, expenses are only deductible where an area of the house is either actually rented out, or available for rent.
For example, where a property is available for rent for 180 days a year then only the portion of rental expenses that were incurred over that 180-day period are deductible.
The property doesn’t actually have to be rented – in this example – for the 180-day period for rental expense deductions to be claimed. The property simply needs to be available for rent.
If no guests stayed on the property during the 180-day vacancy period, and the property is advertised on a rental platform as vacant, and available for rent, you can still claim deductions for the 180-day period.
Where you rent out only part of the property, for example a bedroom with access to shared areas in the property where you live, you can only claim expenses for the period the room is actually rented.
In this case if you only rented the room for two weeks in a year, you can only claim the proportion of expenses for the rented part of the property that is related to the two week period.
This is to stop you claiming deductions for periods where the room might be used for private or domestic purposes, even though it was notionally available for rent.
Capital Gains Tax
In most cases, when you sell your private residence, the sale is free of Capital Gains Tax. But if you have used part of the property for income earning activities – like renting it out through Airbnb or Stayz – part of the gain will be taxable.
This could mean you have to do a tricky calculation on the sale to work out:
how much of the gain is taxable
how much is covered by the main residence exemption.
Typically, the floor area calculation used in working out your deductible expenses will also be used here. Starting from the date on which the property was first used to generate income, a proportion of the gain based on the floor area which was available for rent will be chargeable to tax. This gain will also usually qualify for the 50% Capital Gains Tax discount.
Does Goods and Services Tax (GST) apply?
GST doesn't apply to residential rent, so you're not liable for GST on the rent you charge, and can't claim GST credits for associated costs. This is the case even if your turnover exceeds the GST threshold of $75,000.
Case study
Let’s look at an ATO supplied example:
Sue owns a house with two furnished bedrooms.
She advertises the rooms separately on Airbnb to guests who pay to rent the rooms on a nightly or weekly basis.
Sue provides linen only.
Renting out a room in your house is an input taxed supply of residential rent. Sue isn’t required to charge GST, but similarly won’t be able to claim GST included in expenses she incurs in renting out the rooms.
At year’s end, Sue includes all the rental income in her tax return and claims:
A deduction for the fees charged by Airbnb.
A proportion of her mortgage, electricity and other renting expenses.
If Sue sells the home, she’ll have capital gains to account for as the home has been used partially for rental income purposes.
Keeping records
The ATO has its eyes on those using online rental platforms to make a few extra dollars. For example, Airbnb – and all other rental platforms – are legally obliged to provide data on individuals and their properties who are listed on the site.
Be aware: the ATO uses this to cross reference individual tax returns. Any mismatch, and you can expect a “please explain” letter.
Important: you must disclose all income and expenses relating to any property that you are renting out. Keep proper records of all income earned and allowable deductions for which you’re claiming. This includes details of how you’ve apportioned (or assigned) expenses which are partially for private use.
What about state governments?
Nothing to do with the ATO, but the Victoria government introduced on 1 January, 2025, a short stay levy on Airbnb (and similar) properties.
You may have to pay the short stay levy if you accept bookings for a stay in Victorian accommodation that is less than 28 consecutive days, and charge a fee for the stay.
The levy is a flat 7.5% of the total booking fees paid, including fees and charges such as cleaning fees and GST, where applicable. The total booking fee does not include credit card fees.
Note: the levy does not apply to a short stay in a property that is someone’s principal place of residence (PPR), whether they own or rent the property (for example, where you rent out a room in your place of residence).
The levy must be paid by the booking platform where the booking is made via the platform, or by the property owner or tenant where the booking is accepted without a platform.
Bottom line
The last thing you want when you have a rental property is to be questioned by the ATO, so here are the main points to keep in mind:
Rental income is assessable and has to be declared on tax returns.
As a landlord, you can claim deductions for expenses directly related to the rented area, but shared areas need to be apportioned by floor area or access.
If renting out one area of a property, deductions can only be claimed for periods when the space is actually rented, not just available.
When renting out a whole property, expenses are deductible when the property is available for rent, even if unoccupied.
When selling a property partially used for rental income, capital gains tax may apply.
Always keep accurate records – the ATO monitors income from online rental platforms.
Go deeper:
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
