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Websites such as Airbnb and Stayz have changed the way we access accommodation.  Instead of booking a hotel or holiday property directly yourself, you can use a third-party site. These websites introduce you to a property owner who wants to rent out their property short-term. However, there are some legal challenges facing these websites in Australia.

This article will explore how our current laws are failing to keep up with the new disrupters in the accommodation industry such as Airbnb and the regulations that home-owners must follow if they want to rent out their home.

Council Zoning Laws

The law regulating Airbnb rentals is different in each state. In certain states, local government laws are different from state laws. This can cause some confusion for people who want to rent their home through third-party sites.

Example: New South Wales (NSW) In NSW, local councils regulate short-term holiday rentals. Depending on the Zoning or Local Environmental Plan, the council has the authority to determine whether an individual can rent their property as a holiday rental through Airbnb or Stayz.  If you rent out your property without complying with local council laws, it can result in action being taken against you under these laws or State laws. In addition, changes to NSW laws mean some apartment owners could be banned entirely from renting out their properties with Airbnb. This is because, under these laws, strata owners have the power to pass rules which prevent short term rentals if the owner does not live in the unit/apartment. These are known as by-laws and they must be complied with by all tenants. These laws also introduced a 180-day cap on how many nights owners can rent out their homes if they are based in the greater Sydney area, along with a mandatory Code of Conduct.

Sub-lease or Licence?

Another issue surrounding the emergence of Airbnb is whether or not these short term rentals are considered to be a sublease or a licence. Generally, under a lease agreement, you must obtain the landlord’s consent if you intend to sublease the property. A landlord is allowed to permit another person to occupy their property for a specific purpose and for a set period of time if they have a license.

For example, in a Melbourne-based case, a landlord leased an apartment to tenants, who then listed the apartment on Airbnb without the landlord’s consent. The Supreme Court of Victoria decided that because the Airbnb guests had “exclusive possession” of the apartment, that this was a sublease requiring landlord consent under the lease agreement.

Tax Implications

The Australian Tax Office (ATO) has also raised its concerns with the increasing use of Airbnb in Australia. The primary concern is that people are using Airbnb to evade taxes such as Capital Gains Tax (CGT) and GST.

The income that you receive from your Airbnb rental is generally considered to be part of your assessable income. You may also be entitled to claim tax deductions for expenses incurred for the property as a landlord. These can include:

  • commercial cleaning;
  • repairs; and
  • maintenance.

Therefore, if you are renting your property through Airbnb, it is important that you keep records of your income and declare it in your tax return. Generally, the sale of private property is free from CGT. However, if you used the property to earn income, such as renting through Airbnb, you may be liable for CGT.

Regulatory Issues

There are other regulatory issues that arise in light of the use of Airbnb and Stayz websites. However, the regulations for this area of regulations are not quite developed yet.

As a landlord, if you are using Airbnb, it is important that you take out public liability insurance and advise your insurer that you plan to rent out your property. This is because the Airbnb Host Protection Insurance does not cover everything, including home and contents insurance.

Airbnb Host Protection insurance protects hosts against third-party claims of property damage or injury of up to $1 million.

Other regulatory issues for a landlord to consider are:

  • fire or disability access regulations; and
  • food, health and safety regulations.

Key Takeaways

Websites such as Airbnb and Stayz have provided another avenue for people to find accommodation. They have also provided renters with some extra income from their properties. However, the law in this area is still developing. It is important to stay up to date with the law and know your rights.

If you are planning to rent out your property through Airbnb and Stayz you should:

  • be aware of the local laws in your area to ensure that you are able to rent out your property in the first place;
  • if you are a tenant of a property, make sure you are not in breach of your lease agreement; and
  • consider the tax obligations that may arise along with any regulations that you must adhere to.
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