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Re: Are initial furniture costs and renovations claimable for short term (airbnb) letting?

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Newbie

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I am buying a flat that we plan to put on airbnb for short term rentals. The sale should complete in about 3 weeks and we want to furnish it for letting out in January, then we would like to do some renovations in February.

So, plan is to:

- Buy furniture before completion

- Let it out for a month

- Do the reno work

 

Will all of the above count as claimable costs come tax time? (I heard that for long term rentals you have to have let it out first before at least the reno costs are claimable.)

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Taxicorn

Replies 2

@RickO 

 

Brand new furniture is deductible either immediately if it costs $300 or under, or is depreciated according to the effective life of the asset*.

 

Have a good read of 2019 Rental Properties

 

Other deductions (utilities etc) are generally calculated by area of house used / area of house x days rented / days in year.

 

Renovations would only be deductible at 2.5% over 40 years and then only as a % of area used for the Airbnb

 

Be aware that you will be liable for Capital Gains Tax when you sell the property.

 

Tips for Airbnb hosts

 

* Note if you move back in and start to use that asset privately then you lose the ability to make any future claims on it until the house is sold as part of Capital Gain Calculations.

 

3 REPLIES 3
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Best answer

Taxicorn

Replies 2

@RickO 

 

Brand new furniture is deductible either immediately if it costs $300 or under, or is depreciated according to the effective life of the asset*.

 

Have a good read of 2019 Rental Properties

 

Other deductions (utilities etc) are generally calculated by area of house used / area of house x days rented / days in year.

 

Renovations would only be deductible at 2.5% over 40 years and then only as a % of area used for the Airbnb

 

Be aware that you will be liable for Capital Gains Tax when you sell the property.

 

Tips for Airbnb hosts

 

* Note if you move back in and start to use that asset privately then you lose the ability to make any future claims on it until the house is sold as part of Capital Gain Calculations.

 

Enthusiast

Replies 1

@macfanboy 

 

I am just wondering how Capital Gain Tax should be calculated.

 

Gross Capital Gain * (Floor area used to generate income on Airbnb/Total floor area of the house) * (No.of days actually rented or advertised to rent on Airbnb/Total ownership period)? 

 

Thanks.

PinkyT

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Taxicorn

Replies 0

@PinkyT 

 

Capital Gains is quite a complicated thing to work out.

https://www.ato.gov.au/General/Capital-gains-tax/

 

Basically it is cost received from sale - cost paid + additional buying/selling costs.

Then x (days rented/days owned) x (floor area used / total floor area).

This is then x 50% (owned more than 12 months).

 

When renting out whole house it is number of days available for rent and advertised.

With Airbnb it is number of days actually rented out.

 

 

There are many other things that are used to calculate it, which in most cases will reduce it.

 

This final figure is added to your taxable income for the year and taxed at your marginal rates.