If you were planning to enjoy the Easter long weekend at your holiday house, which you keep as an investment property for the rest of the year, the taxman may be keeping an eye on you.
This year, the Australian Tax Office (ATO) is putting its focus on taxpayers who claim deductions on holiday homes that are not actually available for rent, or are only available to friends and family.
ATO assistant commissioner, Kath Anderson, said that while it’s completely legitimate for friends and family to privately use a holiday home, this reduces your ability to earn income from the property, and affects what tax deductions you can claim on the property:
“You can only claim deductions for your holiday home if your property is genuinely available for rent. You cannot claim for times when you were using it for your own personal holidays or letting friends and family stay rent-free. It’s not ok to expect everyone else to pay for your holiday.”
“Holiday home owners also need to remember that if their property is rented to friends and family at mates rates, they can only claim deductions for expenses up to the amount of the income received.”
According to the ATO, while some investors claim their property is available for rent and thus qualifies for tax deductions, investigation often reveals red flags, such as:
- Placing unreasonable conditions on prospective renters
- Setting above-market rental rates
- Failing to advertise a holiday home in a way that targets people who would be interested in it
- Failing to keep the property in good condition
While tax deductions are available if your investment property is genuinely available to rent, different rules apply when renting out your own private residence, for example on Airbnb.
For further details on the rules around tax deductions on investment properties, including holiday homes, visit the ATO.