Short-Term Rentals and the Tax Rules
The rise of Airbnb, Stayz, and other short-term rental platforms has created a new set of tax questions for property investors. The good news is that depreciation is still available on short-term rental properties. The complexity lies in how it must be apportioned.
---
The Key Distinction: Full Investment vs Mixed Use
Fully Dedicated Short-Term Rental
If your property is exclusively rented through Airbnb (you never use it personally), the depreciation rules are broadly similar to any other investment property:
- Division 40 and Division 43 are both claimable
- The 2017 budget rules apply if the property was previously a residential dwelling (affecting D40 on existing items)
- You claim on the portion of the year the property is available for rent
Mixed Use: Personal and Rental
If you use the property yourself for some periods and rent it out at other times (the common Airbnb scenario), you must apportion your deductions.
The ATO requires you to divide your expenses (including depreciation) based on the proportion of time the property is:
Example:
- Total nights in year: 365
- Nights rented to guests: 140
- Nights available but unoccupied: 50
- Nights used personally: 80
- Nights not available/blocked: 95
If annual depreciation is $8,000, claimable amount = $4,160.
---
The "Holiday Home" Problem
The ATO scrutinises mixed-use holiday homes closely. Simply listing a property on Airbnb does not automatically make all expenses deductible. The ATO looks at:
- Genuine availability: Is the property listed with realistic pricing during peak periods, or is it effectively blocked out for personal use?
- Actual rental activity: A property that earns $2,000 from Airbnb over 2 weekends is not an investment property in the ATO's view — it's a holiday home with incidental rental income.
- Location: Properties in popular holiday destinations (Noosa, Mooloolaba, Gold Coast, Byron Bay) receive heightened scrutiny.
---
Depreciation on Airbnb-Specific Assets
Some assets are particularly relevant for short-term rental properties and may generate additional Division 40 deductions:
- Furniture (beds, sofas, tables) — 13⅓ years effective life
- Appliances (coffee machine, toaster, microwave)
- Linen and towels (much shorter effective life)
- Smart TV and entertainment systems
- Wi-Fi router and networking equipment
---
The Impact of the 2017 Budget Rules
For short-term rentals specifically, whether the 2017 rules apply depends on the property's previous use:
- If the property has never been used as a residential dwelling (e.g., a new build you've always run as Airbnb), Division 40 rules apply as normal
- If the property was previously your own home that you've converted to Airbnb, the 2017 rules DO apply to Division 40 assets that were in the property during the residential period
Record Keeping for Airbnb Properties
The ATO expects thorough records for mixed-use properties:
- Copies of all Airbnb booking records
- Evidence of availability (Airbnb calendar screenshots)
- Records of personal use periods
- Invoices for all expenses
---
Get an Apportionment-Ready Depreciation Schedule
Koste can prepare a depreciation schedule for short-term rental properties that includes the full depreciation schedule and guidance on how to apply the apportionment calculation. Contact us to discuss your property.