The ATO recently issued an information sheet on renting out rooms in homes/flats, etc., and the following are excerpts:
Money your clients earn from renting out a room in their house is rental income.
This applies to rooms rented by traditional means or through a sharing economy website or app.
A taxpayer can only claim expenses related to the part of the house they rent out and they need to apportion the expenses accordingly. This is commonly referred to as the ‘floor area calculation’ method.
However, they can claim 100% of any fees or commissions charged by the rental facilitator or administrator.
CGT may also apply if they sell property used to generate rental income
Claiming deductions when only renting out part of the house – floor area calculation method.
As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user), and add that to a reasonable amount based on their access to common areas.
You can only claim expenses for when the room was available for rent. If you use the room in any capacity, for example for storage or as an office when you do not have guests staying, then you cannot claim deductions for expenses when the room is not occupied.
Example: renting out part of your unit or house
Jane has a two-bedroom unit with two bathrooms. She lives alone and only uses her spare room as an occasional home office, for storage and when she has guests. Jane mainly uses the ensuite bathroom.
The second bathroom is accessible from the main areas and mainly used by visitors. Jane decides to rent out the spare room on a sharing economy website to earn extra income.
The unit is 80 square meters in total. The spare room being rented is 10 square meters, and, when paying guests come to stay, Jane removes all excess items from the room and does not access the area.
Jane also gives paying guests access to common areas including the second bathroom, kitchen, living area and balcony, which total 50 square meters.
For the period guests are staying and have access to the common areas, Jane can claim 50% of associated costs.
Jane also offers her guests access to her Wi-Fi for free.
Jane had the room available and occupied 150 days in the year. When she is not renting out the room she uses it as storage and a home office.
Claiming Rental Deductions
Jane calculates what she can claim based on the following questions:
• How big is the room? 10 square meters
• How big is the house? 80 square meters
• How big are the common areas? 50 square meters
• How many days is the room rented out? 150 days.
She works out she can claim 17.97% of her general expenses after adding the two calculations together:
• room occupancy
— (10/80 x 150/365) x 100 = 5.13%
• common areas
— ((50/80 x 150/365) x 50%) x 100 = 12.84%.
Jane can claim a deduction of 17.97% of her general expenses such as electricity, interest on her mortgage, Internet expenses, rates and body corporate fees.
She can claim 100% of the expenses associated solely with renting out the room, such as the facilitator’s commission or administration fee.
Should you have any queries in regards to the above article, please do not hesitate to contact our office on
02 4958 1829 or email our Client Support Manager on firstname.lastname@example.org
Ref ATO website — renting out a room is rental income