Holiday Home – Claiming Tax Deductions

Hello Chasers,

If you have just come back from your holiday home after the Christmas break, it is a good time to have a refresher on the tax deductions available.

You should remember that you can only claim deductions for holiday home expenses to the extent they are incurred for the purpose of gaining or producing rental income. 

The ATO notes that, while many Australians own a holiday home, there are a small number of holiday home owners who are not reducing their rental deductions when they are not using the property to produce rental income. 

Deductions should be reduced if: 

  • the holiday home is used, or reserved, by the taxpayer during peak periods when it could reasonably be expected that the property would be rented out; or 
  • the taxpayer places unreasonable conditions that restrict the likelihood of their property being rented. 

Taxpayers should consider the following in determining whether the deductions they wish to claim are valid rental deductions, and if they need to be reduced: 

  1. How many days during the income year did they use or block out the property for their own use? Taxpayers cannot claim deductions for the periods the property was used or blocked out by them. 
  2. How and where did they advertise the property for rent, and is the rent in line with market values? If they only used obscure means of advertising, or put unreasonable restrictions or conditions in the advertisement, they may not be entitled to claim deductions. 
  3. Will any restrictions, or the general condition of the property, reduce interest from potential holiday makers? If their property is not in a tenantable condition, they may not be entitled to claim deductions, as the property is unlikely to generate income. 
  4.  Has the taxpayer, or their family or friends, used the property? Taxpayers cannot claim for periods of private use or when the property is kept vacant for personal reasons. 
  5. Is any part of the property off limits to tenants? When taxpayers claim deductions, they should ensure they calculate and apportion deductions in relation to the part of the property that is available for rent.

The ATO have been given $89.6 million in extra funding to ensure that personal income tax compliance over the next two years is closely monitored.

If you need help with your holiday home claims, please call our office on 03-55612643.

Have a great day!

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