SMSFs warned on potential pitfalls with Airbnb rentals

In an online article, Reliance Auditing Services said that the uptake of host services such as Airbnb is increasing, and some SMSF clients may be contemplating using properties owned by SMSFs for Airbnb.

The audit firm said that there are some important compliance aspects relating to paperwork and record-keeping that need to be managed, though, to ensure none of the SIS regulations are breached.

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“The trustee needs to review the investment strategy of the SMSF and ensure it allows for the risks associated with this type of rental arrangement along with the asset liquidity issues,” the audit firm explained.

“While rents received from this hosting service is normally much higher than long-term renting, it is important to have the investment strategy documented appropriately.”

SMSF professionals and their clients should also check the insurance level for the property and ensure it is appropriate to protect the fund’s assets.

It is also important to keep the in-house asset rules in mind, it said, which means that no one associated with the fund — including the members, their relatives or other associates — can use the property.

“Where trustees self-manage the property, it is important to remember here that SMSF trustees are not allowed to receive remuneration for services performed in relation to the fund,” it said.

“In addition, watch out for acquiring assets from related parties such as renovation services or repair and maintenance done to the property.”

GST is another important consideration, according to Reliance Auditing.

“An Airbnb property may be regarded as a commercial residential premise in a sharing economy. In the ATO ruling GSTR 2012/6, it states that if the SMSF trustee’s intention is to list the property on Airbnb and the property has the characteristics of a hotel room, the property may be regarded as commercial residential premises,” the audit firm explained.

“If the ATO deems the SMSF to be providing commercial residential accommodation, then it will treat the SMSF Airbnb activities in the same way as hotels and motels, meaning that the rent could trigger a GST liability for the SMSF. Therefore, if the estimated annual turnover is over $75,000, the SMSF will have to be registered for GST with the ATO.”