A stay in the sun

Side hustles are great when they pay for holidays…

Putting your home up on AirBnB to help fund a delightful European summer of leisure after a few dreary years of Covid might sound like a great idea, but…

Your home as a side hustle and the main residence capital gains tax exemption

The capital gains tax exemption on your home is now the most expensive tax concession on the Commonwealth’s books – calculated to have cost the Treasury $50 billion in 2020-2021 on ballooning real estate values.

The CGT concessions for your home should be simple, but they aren’t.

Funding a European holiday with AirBnB

‘I’m spending two months in Europe for Summer. Putting my house on Air BnB will pay for us to stay at Le Sirenuse, that amazing hotel in Positano.’

We love the Amalfi Coast just as much as you do. Maybe more.

If you’re a renter– go ahead get that place up on AirBnB & enjoy that (free-ish) Campari on the terrace in Le Sirenuse. Deal with your angry landlord after you get back.

If you own your house, hold the bubbles. You may lose some of the CGT exemption on your house.

To illustrate…

Say you let your house out on AirBnB for 2 months while you were on holiday. You owned it a total of 12 months, then sold it, making a profit of a cool $100,000.  

2/12ths or $16,666 of the gain may now be assessable, as the proportion of time the house was used to produce assessable income over the period you owned it.

At the top marginal tax rate of 47% for incomes above $180,000, this equates to extra $7,833 in tax[1] at the time you go to sell the house. Add in the 50% discount for owning it for 12 months and you are still left with almost $4,000 in extra tax when you go to sell.

That’s before you declare and pay tax on the money earned by renting it out.

Not quite a free stay in the sun…

But my friend rented her house out, and she said that she still gets the exemption for 6 years.. How is this possible? Its not fair.  

Your friend is right. And Clever. But putting your home up on Airbnb for a month or two while on holidays in Italy isn’t the same as moving out, and renting it out under a lease.

But I really want to rent my house out will I’m away. What if I moved all my things to the shed? Is that moving out?

The Taxman isn’t known for his sense of humour. The more enjoyable something is, the more the Taxman is determined to tax it. And the Amalfi Coast is the most fun…

The Taxman has a very good memory…

The ATO have for a number of years collected information on everyone who has listed a property on AirBnB or any of the other short term accommodation letting platforms from the platforms themselves. They’ll check to make sure you apply the correct capital gains rules when you file your tax return.  

If you would like any more information on Capital Gains Tax, or really want to do your homework before you make a move, get in touch.

[1] Example for illustration purposes only. The example does not consider any ordinary income or allowable deductions from short term letting of a premises.