Airbnb – has the ATO got it wrong?
If you own your own home you can access one of the greatest and rarest of tax benefits, a large capital gain when you sell it, with no tax to pay.
If you move out from the property and rent it out, in some circumstances, you can continue to nominate the property as your main residence for tax purposes, and keep your valuable tax free status on the property.
According to the ATO, if you do not move out and ‘share’ it, by using a service such as Airbnb, you need to report the rental income to your income tax return.
And you can only claim relevant expenses, against that rental income.
But when you sell your property, the ATO believes you have held the property for dual purposes – as a main residence, and for income producing purposes. So you compromise your tax free status, and you cannot access the full benefits of the main residence exemption.
“You cannot have your cake, and you cannot eat it either”, says Darren Hooper, Principal of Tax Services Australia.
“On the one hand, the ATO treats you as a property investor – you need to report the rental income and expenses just like any investment property”.
“On the other hand, the ATO is treating you as if you have conducted a business from your home, by axing your full entitlement to the main residence exemption”.
He says the ATO should be treating the activity of ‘sharing’ your home as a business activity, without it compromising your CGT main residence exemption.
“Tax the income, net of relevant expenses, but don’t take the main residence entitlement too”.
“You can end up with a bigger CGT bill than the income you derived from ‘sharing’ your home”.
"It is not fair, that tenants can sublet their properties on Airbnb and not lose any main residence exemption, which they might have on another property that they own. Yet owner occupiers, who own just one property, lose their full exemption as soon as they have an Airbnb tenant".