Airbnb

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 Tax implications

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:

GST

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:

  1. Commercial intention
  2. Multiple occupancy
  3. Opened for lease to the public
  4. Provision of services and facilities

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.

Sole purpose test

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:

  • Jonelle Norman

    We want to use cash in our SMSF to purchase a block of small acreage, then use more SMSF cash to have a tiny house (on a trailer) built for the property, in order to then Airbnb it. Is this allowable? Further to that… if we run the holiday letting as a commercial business, can we have a second tiny house on the property (that the commercial business paid for, not the SMSF) and live in that tiny home? Reason being we need to be onsite to manage the Airbnb trailer (cleaning, security etc…). Thanks.

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Jonelle,

      The first part of your scenario is OK. However, stay away from any personal use as it will be a breach of the SMSF rules.

      An excellent guidance is the ATO ruling 20091 that gives some great examples and you can download it here:
      https://www.smsfwarehouse.com.au/smsf-investments/property/investment-rules/

      Paragraph 184 sets the criteria which this example does not meet. Then in example 13 is a scenario similar to yours. The personal use portion would be a breach. This is in contrast to the next example where you can see the personal use is commercial in nature.

      Trust this gives you the guidance needed.

      • Jonelle Norman

        Thank you so much! That gives us more idea of the direction to go in. Thanks again.

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