Close this search box.

Optimising Tax for Short-Term Rentals in Australia

The advent of Airbnb and similar platforms has revolutionised property rental in Australia, offering property owners an opportunity to earn from their real estate investments. Navigating the intricacies of tax for short-term rentals is essential for optimal financial management. TaxTank offers an innovative solution tailored to efficiently handle these tax considerations.

Understanding Tax Obligations and Claimable Expenses

Income Reporting

All income generated from short-term rentals, including Airbnb, must be reported to the Australian Taxation Office (ATO) as rental income.

Claimable Expenses for Shared Properties

When part of your home is used for short-term rental, you can claim a portion of the property expenses. These include mortgage interest or rent, utility bills, property insurance, cleaning and maintenance, and property management fees. The key is to determine the percentage of these expenses that are attributable to the rented space. The calculations vary depending upon if the property is let wholly or partially, and for the whole year or seasonally. 

Calculating Deductible Expenses in Varied Rental Situations:

Whole Property, Part-Year Rentals

The claimable percentage is based on the portion of the year the property is rented. For example, if you rent your entire property for 290 days in a year, you can claim expenses for that period, which is roughly a quarter (290/365) of the year, or 79.5%.

Couple working out square metre to manage Tax for Short-Term Rentals

Part of Home, Whole Year Rentals

Exclusive and Shared Areas: The claimable percentage is based on the square meterage of the exclusively let area plus a reasonable portion of the shared area. For example, if you rent out a 20m² room in a 100m² house and have a 30m² shared living space, the percentage is calculated as follows:

Claimable Area=Exclusive Area+(Shared Area×Usage Percentage)

Claimable Area=20m2+(30m2×Usage Percentage)

Usage Percentage: Determine the proportion of the shared area that is used for the Airbnb rental. For instance, if the shared space is used half the time for guests, the usage percentage is 50%.

Applying the Percentage to Expenses: Once you have the total claimable area, apply this percentage to your expenses. Using the above example with a 50% usage of shared space:

Claimable Area=20m2+(30m2×50%)=35m2

The percentage of the total area used for rental purposes is 35m² out of 100m², or 35%.

Part of Home, Part-Year Rentals 

When only a portion of your home is rented out for a part of the year, the calculation becomes more nuanced. You need to determine the square meterage of the rented area and the duration of the rental. For instance, if you rent out a 20m² room in a 100m² house for 90 days, the calculation is:

Claimable Area Percentage = Claimable Area×Rental DaysTotal Days in Year

Using our example above, Claimable Area Percentage = 35% x 79.5% = 27.8%

Go digital and Calculate Claims Painlessly

Automated Expense Calculations

Navigating the maze of tax deductions is now simpler with digital solutions like TaxTank. It automatically calculates the exact percentage of expenses you can claim, factoring in the rental area and how long it’s been rented. Better still, if something changes simply update your claim calculation to automatically update all expenses throughout the year in seconds.

Efficient Digital Record-Keeping

Keeping a thorough record of all your rental transactions is crucial, and TaxTank’s digital system streamlines this process. By accurately tracking your income and expenses, it ensures you have a comprehensive record for tax purposes, all in one convenient place.

Adaptable to Various Rental Arrangements

Whether you’re renting out your entire property for a short period or just a section throughout the year, TaxTank is versatile. It’s engineered to accommodate a range of rental scenarios, ensuring you’re always prepared, no matter how your rental strategy evolves.

Final thoughts

Engaging in the short-term rental market offers exciting financial prospects, but it also demands astute tax management. TaxTank emerges as an essential tool in this journey, providing tailored solutions for diverse rental scenarios and ensuring ATO compliance. By integrating TaxTank into your tax strategy, you can enjoy streamlined, efficient management of your rental finances, leaving you more time to focus on growing your rental business.


TaxTank Reviews


Important Tax Deadlines

For all incomes earned between 01 July 2023 – 30 June 2024.  

Tax returns can be lodged from 01 July 2024. You can prepare early with TaxTank so you know exactly what’s going on ahead of time.

For all incomes earned between 01 July 2022 – 30 June 2023.  

Tax returns are now OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

Tax returns are OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

More Posts