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.
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The Tax Office told Fairfax Media, advances in data-matching technology, 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.
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, it will account 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 other areas of the home in addition to a bedroom, that use also has to be apportioned between them and the main residents.
Property owners are also at risk of fines for unpaid income taxes if they don’t declare the extra money they’re making.
“As well as deriving assessable income, they will be hit with CGT for the room when they sell,” Tania Waterhouse, principal of tax law specialists said.
“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,” she said.
According to Domain Group figures, during the past year, asking prices for houses in Sydney have risen by 9.2 per cent, while Melbourne prices increased by 10.3 per cent, which could be a significant potential windfall for the Tax Office.
“As house prices have gone up so fast, that CGT could potentially easily wipe out whatever benefits people have got from renting out their properties in the first place,” Mark Chapman, director of tax communications at tax accountants H&R Block said.
“They could lose their income, plus more. Many people renting out their homes on platforms like Airbnb and Stayz, aren’t aware of their tax obligations,” Mr Chapman said.
Stayz regional director Anton Stanish, however, said it does inform home-owners about CGT.
“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,” Mr Stanish said.