It is becoming more and more popular for SMSFs to invest in residential properties and then advertise it as a bed and breakfast on Airbnb. The reason for doing so is that the income received from renting a property out as an Airbnb often outweighs the income received from an ordinary lease.
For properties located in popular tourist destinations, such as Melbourne, there is often a high occupancy rate, which adds to the appeal of purchasing residential properties to be listed on Airbnb.
Income received from residential properties that is leased out as a bed and breakfast or Airbnb is treated as rental income and is generally taxed at the concessional rate of 15%. The SMSF may be able to claim expenses incurred when maintaining or furnishing the property as a deduction in the SMSF’s tax return. For more information on the expenses that can be claimed as a deduction, please click on the button below:
Generally, an SMSF cannot claim GST on a residential property. However, as per our understanding of the ATO’s guidance, an Airbnb property may be regarded as a commercial residential premise in a sharing economy.
The ATO issued a ruling noting the common characteristics of a commercial property which includes but not limited to:
You can access the detailed ruling by clicking on the button below:
Our understanding is that if the Trustee’s intention is to list the property on Airbnb and the property has the characteristics of a hotel room (which means it looks and feels like a hotel room), the property may be regarded as a commercial residential premise. This means that the SMSF can register and claim GST for an Airbnb property in the Fund. For more information on the ATO’s guidance, please see here:
If an Airbnb property is considered to be a commercial residential premise, all the rules surrounding a normal commercial property will also apply to the property. This means that if the estimated annual turnover is over $75,000, the Fund will have to be registered for GST with the ATO.
It is important when investing in an Airbnb to ensure that the property is not leased to a related party as required by the sole purpose test. For more information on the sole purpose test, please click on the button below: