Airbnb Tax Guide for Melbourne Hosts: Short-Stay Rental Tax, GST & CGT Explained

Listing your property on Airbnb, Stayz, Booking.com, or another short-stay platform can be a great way to earn extra income from your home or investment property. But the Australian Tax Office (ATO) has specific rules for short-stay rental income — and they are quite different from the rules that apply to standard long-term rentals.

As specialist Airbnb accountants in Melbourne, we help hosts navigate the tax obligations that come with short-stay rentals — from declaring income correctly and maximising deductions, to understanding the potentially significant impact on your main residence CGT exemption when you eventually sell.

This guide covers everything Melbourne Airbnb hosts need to know for the 2025–26 tax year.

Part 1: Declaring Airbnb Income — What the ATO Knows

The ATO's sharing economy reporting regime requires platforms like Airbnb, Stayz, and Booking.com to report host income directly to the ATO. This means the ATO already has data on what you earned before you even lodge your tax return. If you don't declare it, the ATO will notice.

All income from short-stay rentals — including the nightly rate, cleaning fees charged to guests, and any other amounts received through the platform — must be included in your assessable income for the year it is received.

Part 2: What Deductions Can Airbnb Hosts Claim?

The good news is that Airbnb hosts can claim a wide range of deductions — but they must be apportioned to reflect only the income-producing use of the property. You cannot claim 100% of your mortgage interest if you also use the property personally.

The Apportionment Formula

The ATO requires you to apportion expenses based on two factors:

• Floor area — what percentage of the property's total floor area was rented out?
• Time — what percentage of the year was the property (or that area) available for rent or actually rented?

Fully Deductible Expenses (No Apportionment Needed)

Some expenses are directly related to the rental activity and are fully deductible without apportionment:

• Airbnb service fees — the platform's commission on each booking
• Cleaning costs — professional cleaning between guest stays
• Linen, towels, and guest supplies — purchased specifically for guests
• Advertising costs — professional photography for your listing
• Repairs to the rental area — damage caused by guests
• Guest amenities — toiletries, coffee, welcome packs

Apportioned Expenses

These expenses must be apportioned based on floor area and time:

• Mortgage interest (or rent if you are subletting)
• Council rates and water rates
• Building and landlord insurance
• Electricity, gas, and internet
• Body corporate / strata levies
• General repairs and maintenance
• Depreciation on the building structure (Division 43)
• Depreciation on furnishings and appliances (Division 40)

Part 3: The Main Residence CGT Trap — The Biggest Risk for Airbnb Hosts

This is the issue that catches most Airbnb hosts off guard — and it can cost tens of thousands of dollars when you eventually sell your home.

Your principal place of residence is generally fully exempt from Capital Gains Tax when you sell. But if you have used part of your home to produce income (including Airbnb rentals), the ATO will partially reduce your main residence CGT exemption based on the floor area rented and the period of income-producing use.

How the Partial Exemption Calculation Works

The ATO uses a formula to calculate the taxable portion of your capital gain:

This doesn't mean you shouldn't list on Airbnb — the rental income over 5 years likely far exceeds the $17,578 CGT cost. But you need to know about it in advance so you can plan accordingly.

The 6-Year Absence Rule — Can It Help?

The 6-year absence rule allows you to treat a property as your main residence for up to 6 years while you are absent and renting it out. This can preserve your full CGT exemption — but only if:

• You are renting out the entire property (not just a room while you live there)
• You do not nominate another property as your main residence during the absence period
• You move back in before the 6-year period expires (or accept the partial exemption)

For hosts who rent out a room while still living in the property, the 6-year absence rule does not apply — the partial exemption calculation applies instead.

Part 4: GST and Airbnb — When Do You Need to Register?

Most Airbnb hosts do not need to register for GST. Here's why:

• The GST registration threshold is $75,000 per year in total business turnover
• Residential short-stay accommodation is treated as an input-taxed supply for GST purposes — meaning GST does not apply to the rental income, but you also cannot claim GST credits on related expenses
• If your total business turnover (Airbnb + any other business income) is below $75,000, you do not need to register

Part 5: Land Tax Implications in Victoria

In Victoria, your principal place of residence is exempt from land tax. However, if you are renting out your home on Airbnb for extended periods, the State Revenue Office (SRO) may question whether the property still qualifies as your principal place of residence for land tax purposes.

For investment properties listed on Airbnb, land tax applies in the same way as any other investment property — based on the unimproved land value above the threshold. The short-stay nature of the rental does not change the land tax treatment.

Victoria also introduced a Short Stay Levy of 7.5% on short-stay accommodation revenue from 1 January 2025. This applies to platforms like Airbnb and is collected by the platform on behalf of hosts. It is a separate levy from income tax and is not deductible as a rental expense.

Part 6: Record Keeping — What You Must Keep

Good record keeping is essential for Airbnb hosts. The ATO requires you to keep records for at least 5 years. You should maintain:

Part 7: Airbnb Tax Checklist for Melbourne Hosts

How We Help Melbourne Airbnb Hosts

At Elite Accounting Solutions, we work with Airbnb hosts across Melbourne — from hosts renting out a spare room to investors managing multiple short-stay properties. Our specialist Airbnb accountants can help you:

• Prepare your annual tax return with all Airbnb income and deductions correctly reported
• Calculate your apportionment ratios accurately to maximise legitimate deductions
• Assess the CGT impact on your main residence exemption and plan accordingly
• Advise on whether you need to register for GST
• Structure your short-stay rental activity for optimal tax outcomes
• Advise on the Victorian Short Stay Levy obligations
• Help you understand the long-term tax implications before you start listing