The Australian Taxation Office (ATO) has warned taxpayers not to use holiday homes to claim tax deductions even when the homes are not being rented out.
In the lead-up to the June long weekend, assistant commissioner, Kath Anderson said last year the ATO identified a large number of mistakes in rental property deductions, especially with holiday homes.
“We’ve noticed some people are claiming deductions for holiday homes even where the property is not genuinely being rented out, or genuinely available for rent,” Anderson said.
“There’s no problem with people using their rental property for their holiday, but holiday home owners need to remember they can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.”
The ATO also said property owners needed to understand that if they rented their property at a discounted rate or “mates’ rates”, they could only claim deductions equal to the amount of rent charged.
“One taxpayer had to pay the ATO back over $45,000 in tax from deduction claims made for a holiday home they were renting out to friends and family below the market rate,” Anderson said.
She also warned taxpayers that technology and the use of data was making it easier to identify wrong or suspicious claims, including identifying the location of holiday homes.
Holiday homeowners needed to ask themselves various questions to ensure they were eligible to claim tax deductions including whether they had advertised their rental property, what location and condition the rental property was in, whether they had set reasonable conditions for renting the property and charging market rates and whether they accepted interested tenants unless they had a legitimate reason not to do so.
