Pitfalls with SMSFs engaging in Airbnb, Stayz

Naz Randeria, Managing Director of Reliance Auditing Services, discusses whether a Self-Managed Superannuation Fund can use its residential property investments to engage in short-term holiday letting. There is nothing under the Superannuation law that prevents a SMSF from providing host services such as Airbnb, however, a SMSF trustee must watch out for some pitfalls when using a property owned by a SMSF for such purposes, she writes. 

Naz Randeria

1. Investment strategy

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. 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.

2. Insurance

The trustee needs to check the insurance level for the property and ensure it is appropriate to protect the fund’s assets.

3. In-house asset

In general, the rules applied to Airbnb properties are the same as other residential rental property arrangements, in particular, no one associated with the fund including the members, their relatives, or their associates can use the property. Moreover, since the property used for Airbnb services is usually self-managed by the trustee and not through a real estate agent, it will be essential to keep excellent paperwork to prove how, when, and to whom the property was rented.

4. Contributions and purchase from a related party

When a property is used as Airbnb, it requires daily attention; from booking cleaners to ensuring the keys are ready to be picked up and to constantly filling up stock in 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. In addition, watch out for acquiring assets from related parties (such as renovation services or repair and maintenance done to the property).

5. GST

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 (i.e. it looks and feels like a hotel room), the property may be regarded as commercial residential premises.

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.

Due to the recent uptake of Airbnb, many trustees may be contemplating using properties owned by SMSFs’ for Airbnb. It is critical the trustees tick off all the boxes in regards to day-to-day paperwork and record keeping to ensure none of the SIS Regulations are breached.

Naz Randeria established Reliance Auditing Services almost a decade ago. She has more than 20 years’ experience in the accounting profession gained in working for one of the largest accounting firms in the world, prior to establishing Reliance Auditing Services. Naz regularly presents at accounting conferences and SMSF association State Chapter events and enjoys sharing her knowledge and experience with both her clients and her professional colleagues. Naz holds the following qualifications: ASIC registered SMSF Auditor, SMSF Specialist Auditor (SSAud), Registered Company Auditor, Chartered Accountant from Chartered Accountants Australia & New Zealand, Certified Public Accountant from the Delaware State Board of Accountancy USA, Chartered Accountant from the Institute of Chartered Accountants of India, Bachelor of Commerce (Major in Accounting and Finance). Naz is a member of the following professional organisations: Self-Managed Super Fund Association (SMSFA), Chartered Accountants Australia & New Zealand (CAANZ) and National Tax and Accountants’ Association (NTAA). Contact Naz at info@reliance.com.au or connect with Reliance Auditing Services via LinkedIn