Renting out a room in your home: what you need to know

Can you rent out a room in your home?

If you own a property, you are free to rent out a room to a tenant at any time you choose. However, if you yourself are a renter, you may not always be free to sublet the house. If you decide to get a flatmate, consider checking your lease agreement first to find out if this is allowed. In most cases, you’ll need written permission from the property manager or landlord before renting out a room. Each state and territory also provides information on subletting rules through their websites or fact sheets.

• QLD: Residential Tenancies Authority (RTA)
• NSW: NSW Fair Trading
• VIC: Consumer Affairs Victoria
• SA: Government of South Australia
• NT: Northern Territory Consumer Affairs
• WA: Consumer Protection
• TAS: Tasmania Legal Aid
• ACT: Legal Aid ACT

Do you need to tell your lender before renting out a room?

If you rent out a room in your home while still living there, you usually don’t need to notify your lender. However, it’s worth checking your loan agreement for any special clauses or rules around this.
If you decide to move out and rent out the entire property, you’ll most likely need to refinance to an investor loan. It’s important to inform your lender if you choose to turn your home into a rental properly. Failing to disclose this can have serious consequences, including potential legal penalties.

Does home insurance cover your flatmates?

Standard home and contents insurance policies usually won’t cover damage caused by flatmates who are subletting a room in your home, or their visitors. For this protection, consider taking out landlord insurance. If you’re renting out through a short stay website, there are alternative insurance options offered by some of these providers (in conjunction with insurers).

Certain short stay platforms, such as Airbnb, provide host liability insurance. This policy may cover your legal liability for bodily injury to guests, damage to guest property, and damage to shared spaces such as building lobbies or neighbouring properties caused by guests (or others). It’s a good idea to read the Product Disclosure Statement (PDS) to understand the coverage. You can speak with an insurance provider for any questions you may have when comparing options.

Will landlord insurance protect you as a renter?

If you are a renter, your landlord’s insurance does not typically include protection for your personal belongings. Renters insurance is designed for tenants and can cover all or part of the repair or replacement costs for your possessions if they are stolen, damaged or destroyed.

Does rental income count as part of your regular income?

According to the Australian Tax Office (ATO), if you rent out part of your home—even just one room—the rent that you receive will usually be regarded as assessable income. You’ll need to include it in your tax return and pay tax on it accordingly. If you sell your house in future, you may also have to pay some capital gains tax (CGT). On the other hand, there may be some expenses with subletting that might be tax deductible.

The ATO has further information about renting out all or part of your home. You can also find out about different side hustles if you are considering subletting to make some cash, and consider advice from the ATO about the sharing economy and tax.

How do you rent a room out on a short stay website?

If you choose to rent out a room in your home on a short stay platform such as Airbnb or Stayz, you will typically need to follow these steps:

• Create an account on your preferred platform.
• Verify your identity and banking information.
• Depending on the platform, you may need to provide a formal ID or a photograph.
• Write a listing describing the space and its amenities. Try to be upfront with your description. Misleading information can lead to negative reviews.
• Upload photos to showcase the room and other areas you want to highlight. Appealing and uploading photos may help generate extra interest from prospective guests.
• Set a price for the room. Take into account the prices of similar properties nearby and the time of year. For example, in busy holiday periods, you may wish to increase the price. Also remember that you must pay either a fee or a percentage of your earnings to your platform of choice.
• Make sure your property is clean and ready for guests. The room should be appropriately furnished, with clean linens on the bed and towels for guests. All amenities should work as advertised. Stocking toiletries and bathroom supplies can also be a good idea.

Flatmate vs Tenant: Understanding the Difference in Australia

In Australia, there’s an important distinction between tenants and flatmates, and it affects the rules that apply when you rent out space in your home.

• Tenants: If you rent out a property that you don’t live in, your tenants must have a formal tenancy agreement. Tenants on a signed lease have specific rights under the Residential Tenancies Act (RTA) in each state or territory. For example, you cannot evict a tenant without valid reason or proper notice, and tenants cannot break the lease early without notice or penalties. These laws exist to protect both the landlord and tenant.

• Flatmates: If you are renting out a room in your main home and will live there alongside them, the person is considered a flatmate, not a tenant. Flatmates who aren’t on a formal tenancy agreement are generally not covered by the RTA, meaning fewer legal obligations apply.

Because flatmates are not protected by tenancy legislation, it’s wise to create your own written agreement. This agreement can cover things like:

• Notice periods for leaving the house

• Rent and bond arrangements

• Shared responsibilities and house rules

Without a written contract, you could technically ask a flatmate to leave without notice — but they could also leave without warning. A clear, simple agreement helps provide peace of mind for both parties, avoids disputes, and sets expectations from the start.

How do you find a housemate?

If you’ve decided to rent out a room in your house, you could rent to someone you know or to a stranger, depending on your comfort level. Renting to a known person might be easier since you don’t need to advertise and already know if you’ll get along. However, if you rent to a friend or family member and don’t get along, your relationship may suffer.

Another option is to advertise through a reputable website or community bulletin board. There are websites like flatmates.com.au and flatmatefinder.com.au that connect potential housemates with rooms for rent. These sites typically require you to post photographs of the room, a property description that includes available amenities, and the weekly rent amount.

Most websites also let you browse profiles of prospective tenants and share information about yourself.

What rules should you set for a potential housemate?

When you rent out a room to somebody in your home, it could also be a good idea to establish ‘house rules’ to ensure you can cohabit together successfully.  Below are some important factors to discuss:

• Rent and bond: Agree on the weekly rent amount, when it’s due, and how it should be paid (e.g. bank transfer or direct debit). If you’re taking a bond, decide how much it will be and make sure both parties understand when and how it’s refundable.

• Utilities and internet: Decide whether bills like electricity, water, gas and internet are included in the rent or will be split separately. Be clear about how you’ll divide costs and when payments are expected.

• Food and cooking: Discuss whether you’ll share grocery costs and meals, or prefer to keep food separate. This can help avoid awkward moments over who used the last of the milk or butter.

• Cleaning duties: Set out a simple cleaning schedule or task list so that chores like taking out bins, vacuuming and bathroom cleaning are shared fairly.

• Guests and noise: Talk about how often guests can visit, quiet hours, and expectations for noise levels—especially if you work different hours or value downtime.

• Pets: Confirm whether pets are allowed in the home, and under what conditions. In some states, you’ll need a valid reason to refuse a tenant from keeping a pet, so check the local rules before deciding.

• Parking and storage: Clarify where cars, bikes or other items can be kept, and whether any shared storage areas (like garages or sheds) are available for use.

• Notice to move out: Agree on how much notice either of you must give before moving out, so no one is caught off guard.

If you choose to advertise your room online, it’s worth deciding on these house rules beforehand so that you can mention them in your listing.  A simple written agreement or checklist helps prevent misunderstandings and gives both parties peace of mind.

What are some tips for choosing a good housemate?

Finding the right housemate can make all the difference to your living situation. Here are some practical steps to help you choose someone who’s a good fit:

• Invite them over: Arrange an informal meeting or room inspection so you can get a sense of their personality and lifestyle. Meeting in person helps you gauge compatibility before any commitments are made.

• Ask about habits and lifestyle: Talk about their daily routines, work schedule, and social habits. This can help you understand whether their lifestyle aligns with yours, from quiet evenings to busy weekends.

• Discuss relationships and visitors: Check if they have a partner, children, or frequent visitors who will be spending time in your home, so you can consider how this fits with your own living arrangements.

• Request references: Ask for references from former landlords or employers. This provides insight into their reliability, responsibility, and ability to respect shared spaces.

• Trust your instincts: Beyond formal checks, listen to your gut. If something feels off during the interview or interaction, it’s okay to keep looking for the right fit.

• Set clear expectations early: Use this opportunity to discuss house rules, lifestyle preferences, and responsibilities, so both parties are aligned before moving in.

By following these steps, you increase the chances of a harmonious living arrangement and reduce the risk of conflicts down the line.

Think of it like a mini job interview—but for someone you’ll be sharing a kitchen with.