Do you rent out your holiday home?

Do you rent out your holiday home?

The ATO has warned that it will use the latest technology and data to identify taxpayers making incorrect claims for deductions on rental properties, and holiday homes in particular, this tax time.

Last year, the ATO identified a large number of mistakes with deductions for rental properties, particularly with regards to holiday homes, and has announced that it will be an area of focus this year.

“We’ve noticed some people are claiming deductions for holiday homes even where the property is not genuinely being rented out, or genuinely available for rent,” ATO assistant commissioner Kath Anderson said.

“There’s no problem with people using their rental property for their holiday, but holiday home owners need to remember they can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.”

If you own a rental property, you should ensure you have accurate records of all rental income and appropriate deductions. You can only claim deductions for periods that the property is rented or was genuinely available for rent.

You should also keep in mind the proposed changes to deductions for rental and investment properties made in the 2017/2018 Budget:

  • Going forward you will only be able to claim depreciation on plant and equipment actually purchased (i.e. you cannot depreciate an asset already at the property purchased by a previous owner with reference to a quantity surveyor’s report). These changes will apply on a prospective basis from 9 May 2017, accordingly any plant and equipment held prior to the budget will continue to be depreciated under the existing rules
  • No deduction will be allowable for travel expenses for inspecting/maintaining a residential rental property from 1 July 2017.

If you have any questions regarding the deductibility of expenses related to your investment/rental property or holiday home, please contact our office.

This post contains an excerpt of an article originally published by Accountants Daily, which is available here.