If you are considering hosting a room or property on Airbnb or other accommodation platform, you need to be aware of your obligations to the taxman and of regulations that might affect you.
Your children may have left the nest and you may want to bring in extra income from letting the rooms they have vacated, either as short-term holiday accommodation or longer-term rental. Or you may have invested in an apartment that you want to let out.
Here’s what you need to know.
Type of business
Depending on the scale of your venture, it may be necessary to form a private company, which will separate the finances of the business from your own. For the purposes of this article, we will look at your business being run as a sole proprietorship, whereby there is no separation, and the rental income goes into a bank account in your name.
Taxes on rentals
• Income tax: You need to register with SARS as a provisional taxpayer, if you are not one already, and declare your rental income on your six-monthly provisional returns and on your annual full return. This income minus deductions for expenses (see below), which you also declare, forms part of your total taxable income for the year. This would include your income from other sources, such as interest-bearing investments and a pension or salary.
• Value-added tax (VAT): All businesses in South Africa must register for VAT if their sales or turnover within any 12 consecutive months exceeds, or is likely to exceed, R1 million. Businesses that invoice more than R50 000 a month may register voluntarily. As a VAT vendor, you will need to charge your rental clients VAT on their invoices. However, you can claim back “input VAT”, which is VAT you have paid on goods and services related to the rental, such as on cleaning services, electricity, rates and property management fees.
Deductions for expenses
Allowable expenses related to your rental income may be deducted for tax purposes. You will need to declare these expenses on your income tax returns. They will include property related expenses (such as levies, rates, insurance, interest on a mortgage bond, maintenance and repairs) and operational costs (such as electricity, water, cleaning and laundry, advertising and marketing, and accounting).
When only a portion of your property (say, a room) is being let, you may deduct only a corresponding portion of your property-related and utilities expenses. This is calculated by dividing the floor area of the space being let by the total floor area of the property, including outbuildings.
To substantiate your deductions, it’s essential to keep detailed records of all expenses. This includes receipts, invoices and bank statements.
Regulatory and other considerations
There are moves underway in the government to bring short-term rentals on Airbnb and other platforms into line with the mainstream tourism industry by subjecting them to regulations similar to those imposed on hotels, guesthouses, and hostels. Regulations will likely include mandatory registration with tourism boards, payment of hospitality taxes, and adherence to strict health and safety standards.
Andrew Schaefer, managing director of property management company Trafalgar, says that for homeowners who rely on short-term rentals for income, these new rules could mean more paperwork and extra costs.
“One of the most impactful measures under consideration is a cap on the number of days a property can be rented annually through short-term platforms. This approach has been implemented in other cities to disincentivise Airbnb rentals and encourage long-term leasing instead,” Schaefer says.
Airbnb hosts and prospective hosts need to monitor these developments closely.
Another consideration is that homeowners’ associations and bodies corporate of gated and sectional-title schemes often have their own restrictions on short-term rentals. If the property you intend to let out is in a gated or sectional-title complex, you need to check the rules before proceeding.
Sources:
https://www.airbnb.co.za/help/article/1923
https://thrivecfo.co.za/airbnb-taxes-in-south-africa
https://news.trafalgar.co.za/new-airbnb-rules-to-benefit-sectional-title
