Renting out holiday homes- what does the ATO say?

When you own a holiday home, you can claim tax deductions for expenses when the property is rented out, or genuinely available for rent.

Even if it is not rented out, there will be capital gains tax implications when it is sold.

The following is from the ATO Website:

Holiday homes – not rented out

If you own a holiday home and do not rent out the property, you do not include anything in your tax return until you sell it.

You will have to keep records from the time you purchase the property until the time you sell it to be able to work out the capital gain or loss when you sell.

Holiday homes that are not genuinely available for rent

Expenses are only deductible if your holiday home is genuinely available for rent. Factors that may indicate a property is not genuinely available for rent include:

- it is advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised

- at your workplace

- by word of mouth

- on restricted social media groups

- outside annual holiday periods when the likelihood of it being rented out is very low

- the location, condition of the property, or accessibility to the property, mean that it is unlikely tenants will seek to rent it

- you place unreasonable or stringent conditions on renting out the property that restrict the likelihood of the property being rented out – such as

- setting the rent above the rate of comparable properties in the area

- placing a combination of restrictions on renting out the property – such as requiring prospective tenants to provide references for short holiday stays and having conditions like "no children" and "no pets".

- setting the minimum night stay to five but booking Friday-Sunday for personal use

-you refuse to rent out the property to interested people without adequate reasons.

These factors generally indicate the owner does not have a genuine intention to make income from the property and may be reserving it for private use.


Claiming deductions

If you rent out your holiday home and also use it for private purposes, your expenses are apportioned on a time basis.

You cannot claim deductions for the proportion of expenses that relate to the private use.

Private purposes include use by you, your family, your relatives and your friends free of charge.

If your holiday home is rented out to family, relatives or friends below market rates, your deductions for that period are limited to the amount of rent received.

Source: https://www.ato.gov.au/General/Property/In-detail/Holiday-homes/

Jason Gwerder
Tuesday, 20 November 2018

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