The ATO Has Questions for Holiday Home Owners

If you own and rent out a holiday home be aware that the ATO is introducing new criteria for deductions, to limit people claiming excessively.

Some of the new questions the ATO will be asking from now on include information regarding:

  • What was the number of days the property was actively rented for?
  • Did the price of the rent align with the existing market value?
  • Which and how many platforms do you use to promote the property?
  • Do you have any restrictions or requirements on the type of tenants you allow?
  • Was the property occupied by you or was it rented to friends and family during the recorded time?

The main issue is that some people are creating claims that state the property was rented out, even if during that period it was empty, or was being used for personal reasons.

Going forward, you will need to be more specific with those details, and divide your expenses for the following reasons:

  • If your rental property is not booked or listed as available for the entire year.
  • You use the property as a private residence during the year.
  • Friends and family are given a discounted rate, or not charged at all to stay at the property.

To further enforce these new guidelines, the ATO stated that there will be a limit on deductions if the availability of the property is specifically limited to off peak seasons, and there are legitimate reasons that it would likely be unoccupied during certain periods. For example, if the property is in the snow fields, but it is only made available for rent during the Summer months.

Certain other rental activities might raise suspicion, such as: The property being advertised for rent during the peak season, yet not receiving any bookings or making any income. In this case the regulator might find that the owner had raised the rental price to a much higher rate than what would be realistically expected for the market, or that the property was being used privately.

To avoid being put in the position for suspicious activity, the ATO looks for these things when considering deductions for holiday homes:

  • The property is consistently available to rent during the peak season for the area it is located in.
  • That the owner maintains the property in good condition, that allows people to desire to rent it.
  • The owner is not rejecting bookings or unnecessarily turning down tenants.
  • The advertising is kept up to date and the property is made available to potential renters with ease.
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