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Airbnb and Stayz hosts could be slammed with bills in the tens of thousands of dollars in capital gains tax when they come to sell their homes after the Australian Tax Office confirmed they’ll lose their main residence exemption.
The Tax Office’s advances in data-matching technology, it also revealed to Fairfax Media, now mean it’s fully capable of “keeping up with the sharing economy”, obtaining more than 650 million pieces of data a year from a range of third-party sources, including bank records of individuals’ income.
“The ATO’s technology is … able to find where taxpayers have left out a significant amount of income,” a spokesperson said. “The data enables us to estimate what a person’s assessable income should be and, if something doesn’t look right, it sends up a red flag for us to investigate further.”
When people rent out all, or even part of their residential home, they become liable for Capital Gains Tax (CGT) when they eventually come to sell their house or apartment. That will be on the proportion of the floor area that’s set aside to produce income, and the period it’s used for that purpose, the Tax Office advises.
Even if paying guests use the bathroom, kitchen or lounge room, in addition to a bedroom, that use also has to be apportioned between them and the main residents. Property owners are also at increasing risk of having to pay fines for unpaid income taxes if they don’t declare the extra money they’re making.
Tania Waterhouse, principal of tax law specialists Waterhouse Lawyers, says: “So, as well as deriving assessable income, they will be hit with CGT for the room when they sell.
“The only saving grace is that they can claim mortgage interest expenses as a deduction. The deduction will be the portion of the mortgage that relates to the room.”
With Sydney and Melbourne property prices having surged over the past five years, with Domain Group figures showing that asking prices for houses in the past year alone have risen 9.2 per cent in Sydney and 10.3 per cent in Melbourne, that could mean significant windfalls for the Tax Office.
“They could lose their income, plus more. Exactly how much depends on the type and size and value of the property. The amounts could certainly be substantial.”
Many people renting out their homes, or rooms in their homes, on platforms like Airbnb and Stayz, aren’t aware of their tax obligations, he believes. “But the Tax Office is very well aware of them,” says Mr Chapman. “The whole issue of the sharing economy is very much on their radar now.
“Many people think they’ll be able to avoid it, but they won’t. I would expect to see some people caught this year, and over the next year too.”
Fairfax Media asked Airbnb whether it does inform its hosts of the danger of having to pay CGT but its spokesperson declined to answer the question directly. Instead, it issued a statement saying: “We encourage our hosts to comply with all Australian tax laws and pay all required taxes.
“Overwhelmingly, Airbnb hosts in Australia are everyday people – mums and dads, seniors and young families – who occasionally list their primary residence or spare room to make a modest extra bit of income. The average income for Australian hosts is just $4500 a year, and while this may not sound like a lot, we know the impact can often be life changing.”
Stayz regional director Anton Stanish, however, said it does inform home-owners about CGT. “Capital gains tax is one of the many important issues to be considered as the state government looks at revising regulations for short-term rentals.
“We’re particularly concerned that regulations could disproportionally impact regional areas, which often lack quality accommodation, and depend on short-term rentals to support local businesses and their tourism industry. We’ll continue to communicate these concerns to homeowners in regional areas in addition to informing them of their regulatory obligations, just as we do for capital gains tax.”
Many apartment-owners, meanwhile, are welcoming the Tax Office crackdown. Their peak body, the Owners Corporation Network, has launched a campaign to demand they have the right to decide whether they will accept short-term rentals into their communities. They say platforms like Airbnb and Stayz ride roughshod over their homes.
“We’re already part of the caring, sharing economy,” says Terry Carver, the chair of the Ikon building in Potts Point. “Apartment residents share buildings, common property and facilities. But having short-term lets damages and can destroy the amenity of a building.
“And then we miss out doubly when we lose GST revenue on proper apartment leasing and then people don’t pay their taxes. Half the population by 2030 will be in strata, so it’s important we all get this right.”