A combination of tax crackdowns and insurance obligations is making the prospect of letting homes on holiday letting websites like Airbnb a much less attractive option, according to a story in the Australian Financial Review.
Insurance providers have warned the 140,000 property owners who may be planning short-term lets this summer that their standard home and contents insurance was unlikely to cover “potentially catastrophic” losses.
Meanwhile, the Australian Tax Office has warned holiday let “hosts” that they know who and where they are, and they might want to check their tax returns.
Tax authorities are analysing detailed information of 190,000 clients provided by rental platforms, says the AFR story, and the first round of letters will be sent to apartment owners over the next few weeks, asking them to review their returns, including the income they earned and the deductions for expenses they may have made.
And things are going to get tighter on both fronts as NSW and WA both look to introduce registers of holiday let properties.
The AFR story, which appeared at the weekend, says that most insurers regard short-stay holiday rentals, on platforms such as Airbnb, Stayz, Homeaway, Flipkey and booking.com, as a commercial use of property.
That means owners need to pay for specialist cover, otherwise a damage or public liability claim could cost them hundreds of thousands of dollars.
Insufficient cover for holiday lets was said to be widespread, with home owners or head tenants probably having to pay out of their own pockets for damage to their property or even for personal injury suffered on their property by a guest.
The Insurance Council warning follows several cases where houses and apartments that were intentionally or accidentally damaged by guests turned out not to be covered by normal household insurance.
Extreme cases included properties were trashed after being solely rented for the purpose of holding a party and fully furnished houses stripped of all their contents and fixtures.
Meanwhile Airbnb and other online accommodation specialists are apparently complying with the Australian Tax Office’s request to provide financial details of about 190,000 users who have received income from the platform.
ATO scrutiny includes income from lets and deductions that landlords may have made for expenses – to make sure they are only for the period when the property was genuinely available.
“Information from online platform sharing sites for around 190,000 Australians will be examined to identify taxpayers who have left out rental income and over-claimed deductions,” a tax spokesperson said.
The AFR reported that authorities were receiving data from rival rental sites so they knew “which sites are rented, when they are rented and who the owners are”.
There’s a lot more detail on the original AFR story.