ATO focus on holiday home rentals

The ATO is looking closely at rental property owners incorrectly or falsely claiming deductions for properties that are not genuinely available for rent, or that are used by taxpayers as a personal holiday home.

Assistant Commissioner Kath Anderson has reminded taxpayers that deductions can only be claimed for the rental property to the extent the property is genuinely rented out, and if rented out to friends or families at ‘mates rates’, the deduction can only be claimed up to the amount of income received.

The ATO has emphasised the importance of keeping accurate records of income and expenses, evidence of the property being rented or genuinely available for rent at market rates, and of who stayed at the holiday home and when, including the time when the property is used for personal purposes.

Is your property genuinely available to rent?

Advertise the property

Advertise the property to a wide audience. Advertising through a real-estate agent or an online site is not always enough evidence to demonstrate that a property is genuinely available for rent, and nor is only advertising locally or by word of mouth.

Ensure the property is in good condition

The property must be in a location and condition that will mean tenants will want to rent it. If your property is run-down or in a remote location, it may not be realistic to expect that it will appeal to anyone.

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. Likewise, if you, your family or your friends stay for free, your property will not meet the criteria during that time period. If the property is being tenanted at a discount (mates rates) then the allowable deductions are limited to the amount of rent charged, not market rates.

Accept tenants

If you refuse to rent out your property to interested potential tenants without a good reason, this indicates that you may not have a genuine intention to make income from the property and could be reserving it for private use. In this case, your property wouldn’t meet the criteria for being genuinely available for rent.