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Your holiday home is a great getaway, however, for most of the year this special place is probably not getting much use and costing you money to maintain. With the rise and ease of renting out your holiday home, more and more are doing so, but there are several tax issues to be aware of.

The first huge benefit is you can start claiming any expenses in relation to the property as a tax deduction. That can drastically cut down on the cost of maintaining the property (so keep all your receipts in relation to the property).

However, while those deductions are enticing, the ATO is warning that it is on the lookout for people that are not genuinely renting out their holiday homes and yet are claiming the expenses related to owning the holiday home as tax deductions. Examples of not being genuine in renting out the property might be that you are not advertising the property as being available for rent or that the property is not being rented out for most of the year.

You also can’t claim deductions for the proportion of time that you are using the holiday home for a holiday. This also means not combining ‘work and pleasure’. So, while it might be convenient to do some repairs on the property while you are holidaying - you can’t claim those expenses.

Finally, if you let the home out to a friend you also have to pro-rata the deductions at the rate you let the property out for. A good way to think about your holiday home is like your home internet or your mobile phone. Only claim the portion of use that is for business.

Happy holidaying!