Hi all Meridian Homestay Hosts,
For those Host families who are Hosting Airbnb guests, or considering Hosting Airbnb guests, please acquaint yourself with the latest legislative ruling this week –
We believe it would be advantageous that you familiarise yourselves with the tax free allowance when using Meridian Homestay Services (MHS) versus the income taxed situation when using “sharing or connecting” websites like Airbnb.
Additionally, we point out some compliance requirements and potential risks arising from using “providers” other than MHS.
Homestay (tax free) –
- Currently Homestay, under tax law, is defined as hosting one or two students at any one time, providing the student’s with their own room, access to household facilities, main meals, maybe their laundry and ironing and assisting with occasional transport and other incidentals. The student/s may be required to assist with household chores. Students are required to keep their room clean. This is tax free.
- An Australian Taxation Office interpretative decision or ruling (http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2001381/00001) states that income from student Homestay is not taxable provided only one or two students are hosted at a time. The amounts paid are used to cover household costs and any profit is negligible.
- The term 'Homestay' is used to describe accommodation provided to local and overseas students studying or training at Australian universities or other educational institutions.
- Section 6-5 of the ITAA 1997 provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources.
- Taxation Ruling IT 2167 considers the consequences of different rental income producing situations. Paragraph 18 of IT 2167 states that:
- Amounts received under the Homestay arrangement are determined by the educational institution to cover the expenses of accommodating the student in the home. The amount of the payment is set with regard to the normal cost of supplying food, utilities and overheads for the student. These rates are not regarded as true commercial rates and there are no built in benefit component to the taxpayer for the use of parts of the house. While there might be some surplus on occasions to the home owner, these amounts will generally be small having regard to the expenditure incurred.
Airbnb and other similar websites (commercial arrangements) –
- If you lease a room on a commercial basis, you must include the rental income in your tax return. You may also be liable for capital gains tax on the portion of the house you rent out, when you sell your home.
- Renting out your spare room to travellers, holiday makers or visitors is a great way to expand your horizons and earn extra income in the process. But the income will mostly likely be taxed.
- As Airbnb stated in their submission to the NSW LEGISLATIVE ASSEMBLY COMMITTEE ON ENVIRONMENT AND PLANNING inquiry into the ADEQUACY OF THE REGULATION OF SHORT-TERM HOLIDAY LETTING IN NEW SOUTH WALES (Report 1/56 Oct 2016):
“Airbnb explained that it: … sends an annual notice to hosts in Australia informing them of the total amount of income they have earned through Airbnb, which both reminds them of their obligation to pay income taxes on the income they earn through Airbnb and helps make reporting their income easier.”
From the above it should be noted that Airbnb makes no differentiation on the “types” of income streams and deems income earned through Airbnb as taxable.
- The ATO uses sophisticated data- matching to detect unreported income, so seek professional tax advice from the outset to avoid hefty penalties (per SMH 29/9/13 http://www.smh.com.au/money/tax-matters-when-it-comes-to-homestays-20130928-2ul36.html ).
- Failure to disclose rental income may result in a ''please explain'' letter from the ATO and repayment of money owed for first offenders, and fines or court action for those with a history of tax avoidance (per SMH 29/9/13 http://www.smh.com.au/money/tax-matters-when-it-comes-to-homestays-20130928-2ul36.html).
MHS arrangements in place with our colleges/universities/agents/TAFE etc –
The Host must ensure that the Homestay Premises DOES NOT:
- Have more than three long term students occupying the Homestay Premises at any one time.
- Allow any “guests” from other forms of accommodation business, for example, Airbnb. This requirement is because the guest/s are not vetted and MHS’ education providers don’t allow students to live under such circumstances due to the risk of assault, molestation, stolen identity, intimidation or other harm (which the Host may be vicariously liable for). Also, MHS has no recourse for restitution if the other guest/s steals or otherwise damage the MHS student’s personal effects (However, the Host may be vicariously liable).
Retirement may mean quitting your decades of working 9-5, but it doesn’t mean you necessarily want to stop interacting with people.
Maybe you want to try your hand at become Host family for Meridian Homestay Services (MHS), and earn some extra money and welcome overseas guests into your home. Becoming a Host for MHS can help you make the most of your retirement— and, if you’re an empty-nester, your spare bedrooms.
MHS makes it simple to earn extra money by putting your extra space to work for you. If you can spare a bedroom or two, or three, in your apartment or house. However you choose to Host, MHS offers support that makes jumping into this rewarding experience simple and easy.
So just how much could you make Hosting students for MHS? You are welcome to call our office to discuss payment fees, and start imagining the possibilities. You could save up for that dream trip perhaps, or simply enjoy the company of international students.
Start Hosting now
Thank you to the Host families who entered our competition. This was:
"Please share photos and stories of your recent Homestay experiences. The best story will receive a $50 bonus and will be published in our newsletter and shared online".
The winner of the best Host story is Jane and Miko
We have been Hosting International students from all over the world through MHS for over 15 years, and in this time we have had many interesting people and experiences in our home. We Hosted Yugo from a group of Japanese teachers and he was fabulous! (UNSW - Tohoku University Japan - Arrived 26/8/18 to 28/9/18 - 4 weeks and 6 nights - last sleep).
My husband Miko likes to ask our candidates if they would like to try Kangaroo meat. Some look wide eyed and say 'Thanks, but no thanks', and some like Yugo said 'Yes please'!
Miko cooks the kangaroo in his Indonesian style Rendang sauce with a few secret spices (recipe below). Our gorgeous teacher Yugo asked the next day if anyone from the group would like to try it as well, only thinking 5 or 6 from the group of 20 candidates would want to try it. But he came home that night with a surprising 18 out of 20 saying 'Yes please'!!
They arrived at our home a few nights later with drinks in hand, huge smiles, and appetites to match. Miko and I had cooked Gado gado (vegetables and tofu and a peanut sauce) earlier, and steamed the rice. A couple of teachers who love to cook helped in the kitchen cooking the kangaroo Rendang, glass of wine in hand, whilst learning some new tricks to take home.
The meal ended with pavlova and lamingtons for dessert, while we surprised them with some live music! Miko was a musician in Bali for 15 years, he also amazed them with a couple of Japanese songs that they all sang along with and played various instruments too!
A wonderful night was had by all, and we can thoroughly recommend jumping in and having a bit of fun with your candidates when you can, you don't need to have 18 for dinner of course! For us, the memories and experiences they take back home to share with their family and friends about the fabulous time in an Australian Homestay are priceless.
Jane and Miko
This article was written by Katie Kunkel who studied abroad in Sydney with CAPA International Education during Spring semester 2013 via Arizona State University. Katie stayed with a Meridian Homestay Services host family and below she gives us eight reasons why she was pleased with her decision.
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