Rental income in your home

If you are currently, or have been thinking about renting out a spare bedroom in your home you need to be aware of your rental income obligations. This applies to rooms rented by traditional means or through a sharing economy website or app.
Also, taxpayers can only claim expenses related to the part of the house they rent out (so expenses will need to be apportioned accordingly).
The following example illustrates how the ATO would expect rental deductions to be calculated.

Sarah’s Example: Renting out part of a unit or house

Sarah has a two-bedroom unit with two bathrooms.  She lives alone and only uses her spare room as an occasional home office, for storage and when she has guests.
Sarah mainly uses the ensuite bathroom.  The second bathroom is accessible from the main areas and mainly used by visitors.
Sarah decides to rent out the spare room on a sharing economy website to earn extra income.
When paying guests come to stay, Sarah removes all excess items from the room and does not access the area.
She also gives paying guests access to common areas including the second bathroom, kitchen, living area and balcony, and to her wi-fi.  For the period guests are staying and have access to these, Sarah can claim 50% of associated costs.
Sarah had the room available and occupied 150 days in the year.  When she is not renting out the room she uses it as storage and a home office.

Claiming Rental Deductions

Sarah calculates what she can claim based on the following additional factors:

  • The room is 10 square metres
  • The house is 80 square metres
  • The common areas are 50 square metres

She works out she can claim 17.97% of her general expenses (such as electricity, interest on her mortgage, internet expenses, rates and body corporate fees) after adding the following two calculations together:

  • room occupancy:

–     (10/80 x 150/365) x 100 = 5.13%

  • common areas:

–     ((50/80 x 150/365) x 50%) x 100 = 12.84%.
She can claim 100% of the expenses associated solely with renting out the room, such as the facilitator’s commission or administration fee.
It is also important to note that CGT may apply if a property used to generate rental income is sold.

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