Tax treatment of holiday homes

January 2017

Own a holiday house and rent it out? Make sure you understand what you can and can't claim

If you're fortunate enough to have a holiday home that you rent out, the ATO has released a guide on how to correctly claim deductions. 

Tax treatment of holiday homes

If you're fortunate enough to have a holiday home that you rent out, the ATO has released a guide on how to correctly claim deductions. 

In recent years the ATO has been focusing more on the tax treatment of rental properties in popular holiday destinations. The ATO suspects that some taxpayers are claiming deductions that they are not really entitled to.

New guidance on deducting expenses

As most of us have returned to work to start the 2017 business year, but for those of us fortunate enough to own a holiday home, the ATO has released new guidance about how it expects expenses to be apportioned during periods when:

  • The property is genuinely used as a rental property;
  • The property is used privately; and
  • The property is made available to family and friends for less than market value rent.
A key issue the ATO takes into consideration is whether the property is genuinely available for when when it is not being occupied. In the guide, the ATO has stated which factors indicate that a property is not genuinely for rent:
  • It is advertised in ways that limit its exposure to potential tenants (e.g., the property is only advertised at the taxpayer's workplace, by word of mouth or outside annual holiday periods);
  • The location, condition of the property, or accessibility to the property, mean that it is unlikely tenants will seek to rent it;
  • The owner places unreasonable or stringent conditions on renting out the property such as setting the rent above the rate of comparable properties in the area;
  • The owner refuses to rent out the property to interested people without adequate reasons.

Get guidance on preparing your tax return

As always, getting guidance is the first step. If you have a property that is rented out during holiday periods or you're considering making a property available for AirBnB or Stayz it's worth talking to your accountant, who can help you understand your position from a tax perspective. Call us on 02 9957 4033. 

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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