September 8, 2015

ATO to crack down on rental deductions & holiday homes

Daniel Breheny, Director

The ATO has recently warned that it will be focusing on rental property deductions claimed in 2014/15 tax returns this year.

Particular attention will be given to excessive deductions claimed, especially for properties located in popular holiday destinations around Australia.

Some of the larger rental property expenses which can be claimed as deductions include:
  • Advertising
  • Body Corporate Fees/Strata levies
  • Capital Write Offs
  • Council Rates
  • Depreciation
  • Insurance
  • Interest
  • Land Tax
  • Letting Fee
  • Management Fees
  • Repairs and Maintenance
  • Travel to Inspect/Repair property

For a more comprehensive list of deductible expenses you can download the ATO’s Rental Properties publication (NAT 1729).

Remember, if you are renting out your holiday home you may not be able to claim 100% of your deductions. One method may be to claim a deduction equal to the proportion of days the property was actually rented at a commercial rate (i.e. 50 days/365 days = 13.7%). In some cases, where an active and bona fide effort has been made to rent a property at commercial rates during a period of vacancy, the vacancy period may also be taken into account.

Given this is an area of focus for the ATO we recommend that extra care be taken. If you are unsure whether an item is deductible or of the proportion that you can claim, we recommend you seek advice. Contact details for Tactica Partners can be found here.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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