Accounting all year round

Posted on: 3 November 2020

With international air travel off-limits for the most part, and the situation likely to remain the same for the foreseeable future, Australians will be on the lookout for domestic holiday options. This is a huge opportunity for anyone who has spare accommodation or second home that they may use for renters. If you're thinking about this opportunity, you may be able to make the option even more palatable from a tax perspective. What do you need to know about this as you weigh up your choices?

Accountability

As you market your home to potential renters and receive deposit and payments, you will need to account for tax. This type of revenue will be treated as taxable income, and you will pay based on your prevailing tax bracket.

Itemising

However, you will be able to itemise certain expenditures related to this project in order to bring down your tax payments as much as possible. You need to complete a separate schedule and attach this to your tax return to tell the authorities what you have spent.

If you only use the property for renters and nothing else, then life will be a lot simpler. You won't need to apportion your expenditure and can simply itemise each category as you go through.

Upkeep

The money that you spend to repair or maintain the property is a tax deduction, but you will need to keep all of your receipts to back up your claim. If you need to spruce up the property to get it ready for your first guest, claim back that money on your tax return.

Operations

You will also be able to claim regular operational costs. These can include electricity, water, Wi-Fi and other utilities, together with any relevant insurance. If you need to pay a fee to a central booking database, add it to the equation.

Other Costs

Don't forget to add any money that you spend to promote your property through social media or otherwise. And if you have to meet any costs of your own pocket, remember to add these to the schedule before you bring everything to a conclusion.

Apportionment

Be careful if you decide to offer your property to friends or family during a slow period. If you do not get any revenue for those specific weeks, you'll have to apportion any costs related to that term as well.

Tax Advice

It's best to talk with an experienced tax adviser to make sure that you do everything correctly. They'll also be able to help you with capital gains tax questions when you eventually sell the property, and especially if you want to buy another in its place.

If you have additional questions, reach out to a local tax accountant.