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Paying tax on rental income from renting out your main home

The money you get from renting out your home is rental income. You may need to pay tax on the rental income.

To work out if you'll pay income tax, choose:

  • how long you're renting, and
  • the method you can use to work out your taxable rental income.

Renting out your main home short-term

When you’re renting out your main home short-term, you may be able to work out your rental income using either the:

  • short-stay standard-cost method
  • actual cost method.

Short-stay standard-cost method

The short-stay standard-cost is a fixed nightly rate you can claim against your rental income. It's for short-stay accommodation in your home. 

You can use the method if you only rent out your home for 100 nights or less over the income year. (Each room in your house is equal to 1 of these nights. So if you rent out your three bedroom house for 1 night we'll see that as 3 nights.)

There's no income tax to pay if you charge guests up to the fixed nightly rate. It's exempt income

When you charge guests more than the fixed nightly rate you'll pay tax on the difference. You'll have to file a tax return to do that. You cannot claim expenses as the fixed nightly rate covers those.

Make sure you read the rules before using the method:

Short-stay standard cost for renting out your home or its rooms 

Actual cost method

Sometimes you cannot, or do not want to use the short-stay standard-cost method. When this happens use the actual cost method to work out your taxable rental income. 

With the actual cost method, you split your expenses using floor area guests can use by the number of rental nights. This shows what expenses you can claim against your rental income. 

You'll also have to fill in a tax return to see if you have to pay any income tax to us. 

Actual cost method for working out rental income and expenses

GST and short-term renting

If you're renting out short-term and you're:

  • registered for GST you'll need to pay GST on your short-term rental income
  • not registered for GST, you may have to file and register for GST. 

You'll only have to file and register if your turnover from all your taxable activities is over $60,000 for the year. This includes your short-term rental income.

Make sure you read about GST to find out what your obligations are: 

GST and your short-term rental income

Renting out your main home long-term

A long-term rental usually means you have tenants. When you’re renting out long-term you only use the actual cost method to work out your taxable rental income.

With the actual cost method you deduct allowable rental expenses from your gross rental income. This is for the time it's rented or available for rent.

With long-term residential renting there’s no GST to pay. You do not need to register, file or claim GST for your rental income or expenses.

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Last updated: 28 Apr 2021
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