LAW6001 Taxation Law Case Study

Question 2 (10 marks)

In June 2018 Orpheus Parker purchased a ground floor two-bedroom townhouse in Neutral Bay, Sydney. He decided to rent out part of his townhouse on Airbnb while still living in the property. The total floor area of the townhouse is 850 sq feet (79 m2). The floor space of Orpheus’ bedroom and his private area is 250 sq feet (23.2 m2). The rented second bedroom area is 200 sq feet (18.6 m2). The shared area comprising lounge, kitchen and laundry cupboard is 400 sq feet (37.2 m2). The property has been listed since 1 September 2018 and Orpheus has achieved consistent occupancy rates. During the period of 1 September 2018 to 30 June 2019, the room was rented for 150 days. Orpheus only offered the room to solo travellers and he has received a total of $22,500 in rental income. During this period, expenses relating to occupancy costs, such as mortgage interest, municipal rates, strata levies and home insurance amounted to $50,000. Orpheus also spent $250 on expenses relating to renting the room, i.e., advertising fees and consumables supplied for the room.

Required:

Advise Orpheus Parker of the tax consequences of using his townhouse to produce rental income for the 2018/19 income year. Does Orpheus need to register for GST by doing Airbnb? You must include relevant section numbers in your explanations.