Investment properties can easily become a minefield of facts and figures, but never fear Stellar Accounts is here to help with investment property taxation advice Melbourne, Sydney, Brisbane.

Investment Property and Tax Deductions

Did you know that how you own an investment property with your partner, can impact your tax deductions?

  • The two common types of title are Joint Tenants and Tenants in Common.
  • Joint Tenants is a 50-50 split while Tenants in Common can document the legal entitlement to the property and hence claim tax deductions accordingly.
  • For example, if your rental income is $20,000, and deductions are $18,000 and your legal entitlement split is 70/30, then the income and expenses will also be split using this percentage.
  • Who could this work for? Those with negatively geared properties where the rental loss is split 50/50 between husband and wife, where the wife doesn’t work and doesn’t benefit from her 50% of the loss.

Note: As always check with your accountant and in this case, your solicitor, to ensure this general advice would work in your specific situation.

Investment Property and Capital Gains Tax

In this video our CPA and Registered Tax Agent, Debbie Hoffman explains what Capital Gains Tax and how it applies to any property that you’ve earned rental income from – on a long or short-term basis.

Click here to view video.

Airbnb Property Tips

Are you using your investment property as an Airbnb? Here are a few bits of information that may be of use to you.

Did you know there are negative tax consequences to having friends/family stay in your Airbnb for free or at discounted rates?

This is classed as private use by the ATO and you cannot claim any tax deductions for the period during which they stay.

Is Airbnb Hosting classed as Business or Investment Income for Tax Purposes?

  1. Airbnb is Business Income is something I’ve been hearing from a few people lately – and unfortunately this is NOT correct, in the eyes of the ATO.
  • Airbnb income is, in 95% of cases, treated as investment income.
  • The ATO makes special mention of short-term rentals in its share economy blurb, which states: “popular sharing economy services include: renting out a room or a whole house or unit for a short-time basis, for example Airbnb and Stayz.”
  • The tax treatment of what you earn from these services is the same as any other residential rental property arrangement. This means you must include the rental income in your income tax return.
  • GST does not generally apply to residential rental income.

2. When could Airbnb and other short-term rental income be classed as Business Income? What are the tax implications if you own one or multiple investment properties and rent them on a sharing service?

  • Firstly, it’s important to get good advice as this can be a complex area and being on the wrong side of the tax law can have significant implications.
  • For example, if the ATO deems you to be providing commercial residential accommodation, they will treat your activities in the same way as hotels and motels meaning that the rent could trigger a GST liability for you.
  • Broadly, accommodation falling into this category would have multiple occupancies such as a block of apartments, central management of the properties, and providing services to the guests beyond the accommodation such as breakfast or room servicing.

3. Am I running a rental business?

  • The ATO states that there are four guidelines that need to be met before determining you are carrying on a business:
     – The significant size and scale of the rental property activities – i.e. multiple rental properties which are fully managed by the tax payer.
     – the number of hours spent on the activities.
     – extensive personal involvement in the activities.
     – the business-like manner in which the activities are planned, organised and carried on.
  • Your main sources of income comes from these activities. If your main source of income comes from a job or another business, it is unlikely you are running a rental business.

Investment Property Taxation Advice Brisbane

Stellar Accounts are experts in Airbnb and Investment Property Taxation – contact us today on 0428 887 104.

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Stellar Accounts is Brisbane’s leading small and new business accounting firm. We have a reputation for simplifying your accounting, tax and bookkeeping needs so you don’t need to stress or worry.

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