Home-stay rent accommodated by land tax rules
YOUR ADVICE
I AM thinking about renting out two rooms in my home for Airbnb. I have had conflicting information about my land tax position. Can you clarify?
A spokesperson for the NSW Office of State Revenue tells me that properties that are not owner occupied or owned by a company or a trust are generally liable for land tax. This would include any property used for Airbnb rental purposes which is not occupied by the owner as their residence.
An owner is exempt from land tax if the property is used as the owner’s principal place of residence (PPR). If the owner decides to use part of his or her residence for Airbnb rentals, the exemption will continue to apply if the following conditions are met:
The whole property is rented as an Airbnb rental as long as in any calendar year this usage is less than 182 days. For example, where an owner rents their PPR for a period over summer, the PPR exemption continues as long as after the rental they recommence use of the property as their PPR.
No more than two rooms in the house are occupied under separate agreements for Airbnb rental purposes or if the property contains a separate flat that is used for Airbnb purposes.
Where the usage of the property for Airbnb rentals exceeds the allowed occupancies of a flat or two rooms, and these areas are permanently set aside for use for Airbnb purposes, the property may become liable for land tax.
The liable portion of the property is based on the area of the buildings on the property used for the Airbnb rental purposes as a percentage of the total area of buildings on the property. However, not all land owners in this situation would automatically pay land tax in any given year, as this depends on the land value of the liable portion of their property and if they own other liable land. WE have investment property, which has a current market value of $720,000. We bought this property three years ago for $500,000.
For the first two years we were living in this property and currently we have rented out. We are currently renting and bought land and plan to start building soon. If we sell our city property now and reuse the proceeds for our new home, do we need to pay any tax for the profit ($720,000$510,000= $210,000) that we’re getting?
Make sure you talk to your accountant before signing any contracts.
However, based on the information you have given, you should be within the sixyear capital gains tax exemption period, provided you lived in the house before you rented it out and have not since claimed any other property as your principal residence.
Noel Whittaker is the author of
and other finance books. His advice is general and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au