The ATO has always focussed on taxpayers who claim deductions for holiday homes that are not actually available for rent or only available to friends and family. But this year, the ATO have these types of rental properties in their sights.
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.
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.
New technology, data matching and other systems allow the ATO to identify unusual claims. Where something raises a red flag, it will be investigated. Property owners whose claims are disproportionate to the income received can expect scrutiny from the ATO.
Be sure to keep accurate records of the income you receive from your rental property, expenses you incur, and evidence of the property being rented or genuinely available for rent at market rates. You should also have records of who stayed at the holiday home and when, including the time you and your family stay at the property.
So, is your property genuinely available to rent? If you are undertaking the following, the ATO say YES:
• Advertise the property to a wide audience. This can include real estate agents, online sites, local newspapers and word of mouth.
• Ensure the property is in good condition and position, such that tenants will want to rent it.
• Charge market rates. Charging rent above market rates in order to deter tenants from applying could mean your property is considered to not be genuinely available for rent.
• Accept tenants; refusing to rent out your property to interested potential tenants without a good reason indicates that you may not have a genuine intention to make income from the property.