Your new source of income starts at home
By: Leah Callaghan, Feb 2020
What’s in store for you this year? Are you finally embarking on your dream holiday? Or perhaps the kids are moving out of home and your year is looking a little quieter? Before you pack your bags or turn the spare room into a home office, you may want to consider how these unused spaces can be turned into extra income.
Short term home rentals are an increasingly popular option for those with a spare room, are travelling more, or are looking to get the most from a holiday home. Websites like Airbnb, HomeAway, and FlipKey make it easy to earn some extra money from your assets, but there are a few things to consider before determining if renting out your home is right for you.
Although you don’t need to claim GST, you still need to keep a record of all income that you earn from renting out a room or your home. Your records should also contain items that can be claimed as deductions, this includes any expenses you may incur as a result of preparing your property for guests.
This income needs to be declared as rental income, and it is important to note that even if your house is your main residence you may need to pay capital gains tax (CGT). Renting out any part of your home usually means that you lose your CGT exemption.
It is also important to note that regardless of who registers your home on the platform, the income needs to be declared by the owner of the property, or the lease holder.
In Australia we are fortunate to not have strict laws that ban the use of Airbnb or similar short stay accommodation platforms, however, it is important to check in with your local council to understand the specific regulations for your area.
For example, if you have a home or room in Tasmania you are looking to rent out you will need to register with your local council. For all other states there are currently no laws for compulsory registration.
In New South Wales it is legal for strata to ban short term rentals, as part of the short-term holiday letting plan, if this is not your principal residence. In Queensland, Western Australia and Victoria there are currently no laws permitting strata to ban you from renting out a room or your property. However, most states are in the process of developing new regulations, so it’s important to stay up to date on changing laws and how they will apply to you.
Although we like to think that the people we invite into our homes will treasure it as if it were their own, the reality is, things go wrong and accidents can happen. Insurance is a must for any property, but it is important to make sure your insurance will cover you when you’re renting out your home or room.
Platforms such as Airbnb do come with host protection insurance, which provides up to $1 million USD in the event of third-party injury or damage. However, payment is subject to conditions and you shouldn’t rely on this as your only safeguard.
When looking into short-stay insurance, do your research, as often policies will not cover stays that are less than 90 days, and may want additional information regarding the tenants, which is not possible to provide with short stays.
Additionally, for an added level of security, it is always a good idea to put special items away in locked storage or have rooms that are locked to guests.
Now that you have the financials covered, you can focus on getting the most out of your property. Ensuring furniture is clean and comfortable, offering little extras like a welcome hamper or coffee machine and making sure the images and description is exactly what is offered online, will go a long way to increase the desirability of your room or home.
These little extras can sometimes allow you to set a higher price per night, but it’s always a good idea to see what similar listings are available for in your area to set the right price.
With all the boxes checked, you are now ready to earn some extra cash, start building great reviews for your property online and watch your savings grow!
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of State Custodians. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from a mortgage or finance professional before implementing changes relating to your finances.
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