The ATO has released updated guidance to clarify how it assesses rental property income and expenses, to reflect changes in the way investors rent out their properties.
This is particularly important for clients whose rental property also doubles as a holiday home.
If a rental property that doubles as a holiday home is not used primarily to earn assessable income, taxpayers won’t be able to claim deductions, including for ownership or use expenses (such as interest expenses, council and water rates, body corporate fees, and capital works and depreciation).
Only expenses such as advertising costs, cleaning costs after a guest stay, and booking fees and commissions will be deductible.
If the holiday home is used mainly to produce income, but there’s a small portion of private use (e.g., a week or a few weekends in the off-season where there was no booking, or very low chance of a booking), then taxpayers may claim a deduction (although the expenses must be apportioned, and they cannot claim for the period of private use).
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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