The ATO currently have an increased focus on rental property deductions and are paying close attention to excessive deductions claimed for holiday homes.
What does this mean for you?
If you rent out your holiday home, you can claim expenses for the property based on the proportion of the year that it was rented or was genuinely available for rent.
The ATO will not allow you to claim deductions where the property is not genuinely available for rent. Factors that may indicate whether it is not genuinely available for rent include:
These factors generally indicate that the owner does not have a genuine intention to make income from the property.
You also have to apportion your expenses if the property is used:
If you do not rent out your holiday home, you cannot claim expenses for the property and do not include anything in your tax return until you sell it.
If you rent out your holiday home and also use it privately, you cannot claim deductions for the entire year. Your expenses are apportioned on a time basis where the property is used for private purposes, including by yourself, family or friends free of charge.
If you rent your holiday home to family or friends below market rates, your deductions are limited to the amount of rent received.
Please contact KK Partners to discuss your situation if you think this may apply to you.