The Australian Taxation office is cracking down on those who rent out all or part of their property on Airbnb, or similar platforms, without reporting the income they receive. Over the coming weeks the ATO will send stern letters warning Airbnb hosts to report their income correctly. These letters will also outline what those who incorrectly report their income can expect if they do not comply with the letter.
These letters form part of an initiative by the ATO to ensure that every Australian is reporting their income correctly and paying their share of tax. The objective of these letters is to educate those using the sharing economy on their tax obligations.
How will they know if I haven’t declared my income correctly?
The ATO has access to a large amount of data enabling them to notice any discrepancies in reported income. They will be looking at reported income, transaction data, and information from Airbnb themselves to determine who is incorrectly reporting their income.
Recently Airbnb was forced to reveal the data of Australian hosts to the ATO. Among this data were names addresses and phone numbers that the ATO can use to cross reference their own database. Airbnb emailed over 200,000 Australian hosts to warn of the legal notice, and to inform hosts that they were complying with the notice.
What will I have to do when I receive the letter?
If you receive the letter you should update your income tax return immediately to ensure you have reported all income you have earned, including that from Airbnb. If you need assistance with updating your tax return you should talk to an accountant. There may also be deductions you can claim that are unique to operating an Airbnb. These can include:
· Depreciation of furniture used in the Airbnb
· Commercial cleaning of the Airbnb
· Repairs and maintenance
· Food made available for the guests
· Professional photography to advertise your listing
· Service fees and commissions charged by Airbnb
What happens if I do not update my tax return?
If you do not update your tax return by November 25 you could be audited by the ATO. If this audit finds that there are incorrect claims, or your income is declared incorrectly you will need to pay the ATO. You could also face a penalty.
Further penalties you could face for an overdue tax return increases depending on how late you are. The fine increases by $210 for each 28-day period you are overdue. This continues until a maximum of $1050 is reached.
I do not have time to update my tax return, what can I do?
If you lodge your tax return through a registered tax agent you can receive an extension to the deadline. Tax agents can offer extensions to deadlines to allow the agent to lodge your tax return up until May 15, 2020. However, to qualify for this deadline you must register with your tax agent before October 31st, even if you plan on lodging your tax return later.
If you find yourself with a letter from the ATO regarding potentially unreported income from the sharing economy, you should talk to Link Advisors. We will work to maximise your deductions, ensuring that the tax you will be required to pay is minimal. If you have unreported Airbnb income, come have a chat with us today.