Seven Steps To Setting Up Your Airbnb Taxes

By Jess Murray CPA, Registered Tax Agent & Airbnb Tax Specialist

Starting an Airbnb comes with a steep learning curve. You decide to take the plunge, and suddenly you’re making decisions about cleaners and property managers, fine-tuning your listing, setting prices, and thinking about furniture, styling and guest experience. 

But for many new Airbnb hosts, the most daunting part isn’t the operational side at all; it’s understanding how Airbnb tax works in Australia and what the ATO expects from day one for short-term rental properties.

This article is a practical crash course for new hosts who want to get their Airbnb taxes set up properly from the start. It walks through the essential tax steps every host should understand, from the basics of how Airbnb income is taxed through to bookkeeping, deductions and preparing your tax return. The goal is simple: to help you put a clear, compliant tax system in place early, so the financial and administrative side of your Airbnb stays simple and stress-free as you grow.

EasyBnbTax is an Australian tax firm. We’ve written this article specifically for Aussie Airbnb hosts, using Australian tax law and Australian Tax Office requirements for Airbnb. If you’re based in a different country, this information won’t apply to you.

Table of Contents

• Step 1: Understand the Airbnb Tax Basics First >
• Step 2: Budgeting for Airbnb Setup Costs Before Your First Guest >
• Step 3: Which Airbnb Repairs Are Deductible >
• Step 4: Buying Furniture and Appliances? Understand Airbnb Depreciation First >
• Step 5: Setting Up Airbnb Bookkeeping the Right Way >
• Step 6: Set Up A System To Save For Tax Bills >
• Step 7: Lodging Your Airbnb Tax Return >
• Putting It All Together: How to Manage Airbnb Tax with Confidence >

Step 1: Understand the Airbnb Tax Basics First

Is Airbnb Income Taxable?

As a baseline rule, rental property income must be declared as taxable income whenever a property is rented at market rates. Because Airbnb listings are publicly advertised and are priced alongside other short-term rentals, Airbnb income will always meet this definition by default.  

Income for bookings negotiated off Airbnb or arranged privately will also meet this definition and must be declared. This is true even if you offer a discount, for example, to repeat guests, or to friends and family. Your discount may be based on higher trust, lower risk, repeat business or booking incentives. All of these are commercially rational reasons, so they still meet the ATO’s rule of being market rates.

The only situation where Airbnb income may not need to be declared is when a property is rented to a friend or family member at well below market rates, but in those cases, tax deductions for that period are not available either.

Do I need an ABN for Airbnb?

The short answer is no. In the vast majority of cases, Airbnb income is treated as rental income, not business income. This means that Airbnb income and expenses are reported in the rental property section of your tax return, and rental property tax rules apply. It also means GST registration is not required, and there is no access to small business tax concessions like the Instant Asset Write Off. 

Do I need to register for GST for Airbnb?

No. Because the ATO treats Airbnb income as rental income, not business income, Airbnb hosts don’t have to register for GST. Further, hosts aren’t permitted to register for GST voluntarily, as they are not considered to be running a business. But in any case, GST doesn’t apply to residential rental income, including Airbnb, and GST can’t be claimed on related expenses. So a GST registration isn’t relevant either way. 

How Airbnb Tax Is Calculated?

If your Airbnb income is higher than your deductible expenses for the financial year, the result is an Airbnb profit. That profit is added to your other taxable income for the year, such as salary and wages, business income, or investment income, and is taxed at your marginal tax rate.

This means the tax impact of Airbnb can look very different from one host to another. Someone earning Airbnb income on top of a high salary may pay a much higher rate of tax on that income than someone with a lower overall income. 

For example, take Airbnb Owner A, who makes a profit of $10,000. They also have an employee job with a salary of $100,000, which means their marginal tax rate is 32%. The tax on their Airbnb profit would be $10,000 x 32% = $3,200. 

Compare this with Airbnb Owner B, who also makes a profit of $10,000, but they don’t have any other taxable income besides Airbnb, which means their marginal tax rate is 0%. The tax on their Airbnb profit would be $10,000 x 0% = $0.

How Do Airbnb Losses and Negative Gearing Work?

If your Airbnb expenses exceed your Airbnb income for the year, the result is an Airbnb loss. This is particularly common in the first year of hosting, where setup costs may be high, and bookings may be inconsistent while the listing gains traction.

When an Airbnb records a loss, that loss can be offset against other taxable income, such as salary or wages, so it behaves like a tax deduction. This outcome is commonly referred to as negative gearing. No special election or extra step is required to apply negative gearing. It happens by default as part of the tax return calculations once the rental property schedule is completed.

As with profits, the tax benefit of an Airbnb loss depends on your marginal tax rate. A higher-income earner may see a more noticeable reduction in their overall tax bill, while someone on a lower income, or below the tax-free threshold, may see little or no tax benefit from the loss.

How Does Tax Work for Jointly Owned Airbnbs?

If your Airbnb property is jointly owned, income and expenses must be split according to the legal ownership shown on the property title. In most cases, this means a 50/50 split, regardless of who does the cleaning, guest communication or day-to-day management. There is no deduction for your time, and no way to shift income to a lower-taxed owner. 

For jointly owned properties, as mentioned previously, Airbnb income and expenses must be split according to the legal ownership on the title of the property.

To see this in action, take a couple who jointly own an Airbnb that records a profit of $20,000. Partner B does all of the cleaning and day-to-day management, but this has no tax impact. The ownership is 50/50, so 50% of the Airbnb’s profit must be taxed at one partner’s marginal tax rate, and 50% at the other’s marginal tax rate. 

• Partner A’s marginal tax rate is 39%, so they’ll pay tax of $10,000 x 39% = $3,900 on their share of the Airbnb profit. 
• Partner B’s marginal tax rate is 18%, so they’ll pay tax of $10,000 x 18% = $1,800 on their share of the Airbnb profit.  

Step 2: Budgeting for Airbnb Setup Costs Before Your First Guest

Furnishing an Airbnb often costs more than new hosts expect. Unlike long-term rentals, Airbnbs need to be fully equipped from day one, and a high standard is essential to keep guests happy and generate positive reviews. The biggest challenge is that all of this expenditure must happen before income starts flowing. This means that prospective hosts need to have enough money in the bank before they begin, and so an accurate budget for Airbnb setup costs is essential.

Typical furnishing and fit-out costs include:

• beds and mattresses
• lounge furniture
• dining settings
• kitchenware
• appliances
• multiple sets of linen and towels
• cleaning equipment
• window coverings
• lamps
• decor and artwork
• storage solutions
• outdoor furniture

All of these items are essential for a well-rated Airbnb, and they need to be durable enough to stand up to the extra wear and tear of heavy guest use.

Once the property is furnished, there’s yet another layer of Airbnb operational setup costs to budget for, things like:

• insurance upgrades
• local permits
• professional photography
• fire safety and pool safety checks
• repairs and cosmetic patch-up work
• keys or smart access systems
• security costs
• wifi upgrades

At the same time, holding costs like council rates, mortgage repayments and utilities continue while the property is being prepared and no income is coming in.

The scale and scope of this list show that setting up an Airbnb is a significant investment. This is why a comprehensive and realistic budget is critical. It’s not uncommon for hosts to run out of funds mid-setup and have to pause while they build up the remaining cash. The delay of that first income payment can really sting, especially because mortgage repayments and other property holding costs continue to tick over while the setup is on hold. By budgeting carefully from the outset, you can avoid delays, reduce holding costs, and get your first guest in the door as quickly as possible.

Step 3: Which Airbnb Repairs Are Deductible?

Most new Airbnbs require some level of work before the first guest arrives. This might be minor patch-ups and fixes, or more substantial renovations to improve the property and maximise bookings. From a tax perspective, however, the ATO’s rules around Airbnb repairs are not straightforward, and not all repairs are tax-deductible up front, or even at all.

The key distinction the ATO makes is between repairs and improvements. A repair restores something to its original condition after wear or damage, while an improvement makes the property better, newer or more functional than it was before. This distinction matters because repairs are claimed immediately, while improvements are treated as capital works or new assets and are claimed over time instead.

Repairs that are carried out during the Airbnb setup phase have additional tax rules to consider. Whether a repair is deductible or not depends on what the property was used for before Airbnb, and when the damage that is being fixed actually occurred. Repairs to pre-existing wear and tear are often not deductible upfront, even if the work feels necessary to get the property ready for guests.

The ATO’s rules for Airbnb repairs are technical, but they’re important to understand so that you can make informed decisions when preparing your Airbnb for guests.

For a full breakdown of how to claim these costs, see our detailed guide on How To Claim Airbnb Repairs and Renovations >

Step 4: Buying Furniture and Appliances? Understand Airbnb Depreciation First

Furnishing an Airbnb is a major part of the setup process, and it’s another area where the tax rules are often misunderstood. Large items like furniture and appliances can’t be claimed in full upfront. Instead, the tax deduction must be spread over time, through a process called depreciation.

What Is A Depreciable Asset?

A depreciable asset is a physical item that has an ongoing use, can generally be removed without damaging the property, and keeps its own identity rather than becoming part of the building. Common depreciable assets in an Airbnb include:

• beds and mattresses
• couches and sofas
• dining tables and chairs
• refrigerators and freezers
• washing machines and dryers
• dishwashers
• ovens, cooktops and rangehoods
• televisions
• air conditioners and heaters
• outdoor furniture sets

How Does Depreciation Work?

Depreciation is the way the tax system spreads the cost of an asset over its useful life, rather than allowing the full cost to be claimed upfront. It reflects the idea that assets wear out, become obsolete, or lose value over time as they’re used to earn income.

The rate at which an asset is depreciated depends on its effective life, which is the period the Australian Taxation Office estimates the asset can be used to produce income. The ATO publishes effective life guidelines for common assets, such as furniture, appliances and equipment. These effective lives are used to calculate the annual depreciation rate.

Here’s a simple example of how the depreciation calculation works, taking a TV purchased for an Airbnb:

• Purchase Price = $1,000
• Purchase Date = 1st of April
• Apportionment in the first year = 91 days
• ATO’s effective life for a TV = 10 years

As you can see, the depreciation is apportioned in the first year, highest in the second, and then the tax benefits taper off gradually over time.

What Is A Low Cost Asset?

Low-cost assets are treated differently. An asset is considered low cost if it costs less than $300 per property owner. For single-owner properties, this means a $300 threshold, while for jointly owned properties, the threshold effectively becomes $600 per asset. Items that are designed to be used as a set, such as dining chairs or a linen set, must be counted as one asset for this test.  

Common low-cost Airbnb assets include:

• kitchenware and small appliances
• lamps and small electrical items
• décor items
• low-cost furniture and linen
• household equipment used by guests
  

Low-cost assets can be claimed in full in the year they are first installed and ready for use, rather than being depreciated over time. For low-cost assets bought during the Airbnb setup phase, this deduction occurs on the date the Airbnb is listed and available for rent. This upfront deduction is a win for Airbnb hosts because their whole tax benefit from the purchase arrives sooner than if the asset were depreciated. 

Only Brand New Assets Are Deductible

An important restriction here is that only brand-new assets are tax-deductible. Brand new means your Airbnb guest must be the first-ever user of the item. Assets bought second-hand, or items that were previously used privately in your own home, cannot be claimed under ATO rules.

That said, buying second-hand furniture or reusing existing items can still make financial sense, as the cost savings often outweigh the lost tax deduction.

The Importance of Understanding Depreciation

Because depreciation deductions run for many years, getting the classification and calculations right from the start is important. Otherwise, errors in year one can carry forward and compound year after year. Understanding the depreciation rules also helps with making smarter buying decisions during setup. A few dollars can make a difference between an up-front deduction and one that takes many years to come in. By purchasing strategically, you can accelerate your tax benefits and boost your first-year tax position.

For a full explanation of Airbnb depreciation rules, how to track your asset purchases, and common traps, see our detailed guide on Airbnb Depreciation >

Step 5: Setting Up Airbnb Bookkeeping the Right Way

Airbnb bookkeeping may be one of the least glamorous parts of running an Airbnb, but it’s also one of the most important when it comes to smart management decision-making, maximising profits, and staying ATO compliant.

Tracking Airbnb Expenses

You need a system for collecting receipts and tracking expenses from day one, including physical receipts, emailed invoices, and online purchases. A lost receipt is a lost tax deduction, which is money down the drain. So although this can feel like a chore, it’s one that makes you money. The ATO requires you to keep records for at least five years, so your process needs to be simple and low-friction enough that you can maintain it consistently.

The Importance of Good Airbnb Bookkeeping

Good Airbnb bookkeeping also means turning your activity into clean totals. Your income and expenses need to be captured and categorised as you go, so you can track profit and performance during the year, and so that tax time is a straightforward summary exercise rather than an end-of-year scramble.

A specialised Airbnb bookkeeping system is essential. The ATO only allows deductions for the portion of expenses that relate to earning Airbnb income, which means you may need to split costs between income-producing use and private use, based on both booking days and the floorspace of your property. This apportionment process adds a layer of complexity that doesn’t exist for most standard rentals, and it’s a key reason Airbnb bookkeeping requires purpose-built software.

The EasyBnbTax Ultimate Airbnb Spreadsheet

The EasyBnbTax Ultimate Airbnb Spreadsheet is built specifically for Australian Airbnb hosts to handle this end-to-end. It gives you simple income and expense tracking, a built-in depreciation calculator, and an apportionment calculator, with end-of-year totals aligned to the rental property schedule in MyGov. You can use it to lodge your own tax return with confidence, or hand your accountant a tidy, complete set of records.

Read more in our dedicated articles on Bookkeeping for Airbnb and Apportionment for Airbnb. You can also check out the EasyBnbTax Ultimate Airbnb Spreadsheet to see if it’s right for you.

Step 6: Set Up A System To Save For Tax Bills

Airbnbs often have high setup costs in the first year, which can result in a taxable loss, and therefore no immediate tax bill. This means that tax savings aren’t typically front of mind when first starting out with Airbnb. 

However once the setup phase is over and bookings stabilise, most Airbnbs move into profit. When that happens, an end-of-year tax bill becomes inevitable. Unlike wage income though, there is no tax withheld from Airbnb income along the way, meaning tax must be paid in a lump sum on your year-end tax return. This is why many Airbnb hosts are caught off guard by their first profitable year.

The simplest way to avoid this is to save for tax as you go. Set up a separate savings account in your online banking, and regularly transfer a portion of your Airbnb earnings to create a tax buffer that grows alongside your profits. This turns taxes from a once-a-year shock into a manageable, predictable expense.

The EasyBnbTax Ultimate Airbnb Spreadsheet helps with this by showing your running profit or loss throughout the year. By applying your marginal tax rate to that profit, you can see roughly how much tax will be payable, and whether your savings are on track. This gives you peace of mind during the year, and significantly reduces the risk of an unexpected tax bill at the end of the financial year.

Step 7: Lodging Your Airbnb Tax Return

If you’ve kept good records during the year, the reality is that lodging an Airbnb tax return in Australia is usually far more straightforward than people fear. The hard work happens during the year, and at tax time, lodgement is just about pulling totals together and entering them correctly into the tax return.

There are two ways to lodge an Airbnb tax return in Australia. You can lodge yourself using MyTax through your MyGov account, or you can lodge through a registered tax agent. 

Airbnb Tax Return Lodgment Deadlines 

If you lodge your own Airbnb tax return through MyGov, the standard individual tax return deadlines apply. For most Airbnb hosts, this means:

• your tax return must be lodged by the 31st of October following the end of the financial year.
• any tax payable is due on the 21st of November.

If you use a Registered Tax Agent, and you lodged your previous year’s tax return on time, your lodgment deadline is extended to the 15th of May. However, you must be on your Tax Agent’s client list by the 31st of October. Payment due dates vary depending on when the return is lodged:

• If your return is lodged on or before the 12th of February, payment is due on the 21st of March.
• If your return is lodged from the 13th of February to the 12th of March inclusive, payment is due on the 21st of April.
• If your return is lodged on or after the 13th of March, payment is due on the 5th of June.

Preparing To Lodge Your Airbnb Tax Return

Before lodging your Airbnb tax return, you need a clear snapshot of your Airbnb income, expenses and other relevant information for the year. Regular bookkeeping is what makes this step quick and straightforward, rather than an end-of-year slog through piles of receipts and invoices. You will need to gather:

• property and ownership details
• total Airbnb income declared as gross income
• annual expense totalled by category
• apportionment percentages where there is private use
• depreciation and asset information

Lodging Your Own Airbnb Tax Return on MyGov

Lodging your own Airbnb tax return through MyGov is a great choice for Airbnb hosts with a relatively straightforward setup, who are comfortable working with their numbers, and who have a solid understanding of how Airbnb income and deductions are calculated. 

Airbnb income is lodged as part of your regular individual tax return using the rental property schedule in MyTax. There is no separate Airbnb tax return. You enter your property details, ownership percentages, total Airbnb income, and annual expense totals, and MyTax applies these figures to your overall tax calculation.

The EasyBnbTax Ultimate Airbnb Spreadsheet is designed to make this process simple. It’s custom-built for Australian Airbnb hosts, handles all of the ATO’s calculation requirements, and aligns perfectly with MyTax. It collates the income and expenses you’ve entered throughout the year, applies apportionment where required, calculates depreciation correctly, and produces a clean end-of-year tax summary. These final totals line up directly with the MyTax rental schedule, so you can type them straight into MyGov with confidence. If you want the option of lodging your own Airbnb tax return, the Ultimate Airbnb Spreadsheet is the best tool on the market.

Lodging Your Airbnb Tax Return Through A Tax Agent

Using a tax agent for your Airbnb tax return is the best choice for hosts who want professional oversight, especially when dealing with a more complex Airbnb setup, or when lodging their first Airbnb tax return. The first year of an Airbnb often involves higher setup costs, new asset purchases, depreciation decisions and classification issues. These all benefit from expert guidance.

The EasyBnbTax Express Tax service allows you to have your Airbnb tax return prepared and lodged entirely online by an Australian tax agent who specialises in Airbnb tax. You can lodge from home, communicate via email, and have peace of mind knowing your Airbnb income and deductions have been handled correctly and in line with ATO requirements.

Putting It All Together: How to Manage Airbnb Tax with Confidence

If there’s one takeaway from the steps above, it’s that Airbnb tax is manageable when it’s approached deliberately.

By understanding the rules early, you can make informed financial decisions as you set up and run your Airbnb, and avoid much of the uncertainty that causes stress for new hosts. And when you also invest time in setting up a proper bookkeeping system from the start, the tax side of an Airbnb becomes predictable, controlled, and far easier to manage year after year.

Get A Proper Understanding – The EasyBnbTax Complete Online Course 

If you’re looking for a deeper understanding of how to manage your Airbnb taxes, that’s exactly what the EasyBnbTax Complete Online Course is designed to deliver. 

This course walks you through everything you need to know to manage your Airbnb taxes from start to finish. Setup costs, deductions, depreciation, apportionment and bookkeeping are all covered step by step, using plain English and real Airbnb examples. You learn not just what to do, but why you’re doing it.

The course includes 30+ video lessons, the full version of the Ultimate Airbnb Spreadsheet with lifetime updates, a step-by-step MyTax walkthrough so you can lodge your own tax return, and ongoing support. And it’s 100% tax deductible. This course is a smart financial decision for new Airbnb hosts. It pays for itself by teaching you to maximise your legitimate tax deductions, showing you all the common mistakes to avoid, and empowering you to lodge your Airbnb tax return if you choose. 

If you want to feel confident managing your Airbnb taxes, the EasyBnbTax Complete Online Course is a smart solution. Learn more on our course information page, which includes a free sneak peek video lesson with some handy tax deduction tips.

Questions? Thoughts? Pop them in the comments below and I’ll get right back to you!

Happy hosting! – Jess