The money from renting out your home is income. Whether you rent out long term or offer short stays sets how you work out the tax you need to pay.
Renting out your main home for short stays
When you’re renting out your main home as short-stay accommodation, 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 rent out your home for only 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 3 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 stay renting
Renting out your main home for short stays is a taxable activity for GST.
You'll only have to register and file if your turnover from all your taxable activities is over $60,000 for the year. This includes your short stay rental income.
Make sure you read about GST to find out what your obligations are.
GST and renting out residential property
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.