(02) 8824 7485 This email address is being protected from spambots. You need JavaScript enabled to view it.
Integrity, Innovation & Commitment
ATO Targeting Holiday Homes

ATO Targeting Holiday Homes

  • Thursday, 13 April 2023 08:05

The Australian Taxation Office (ATO) has issued another reminder for clients and practitioners to be careful when dealing with properties that are used as holiday homes and to generate rental income. This has been a target area for the ATO in recent years and it seems like the ATO is still concerned about the deductions being claimed by some taxpayers in relation to properties that are used for mixed purposes.

The ATO indicates that there are a number of holiday home owners who are claiming deductions that are six times higher than the income generated from the property. Clients with large deductions or losses are more likely to be targeted by the ATO for review or audit.

The ATO suggests that practitioners ask the following questions (at least) of clients who have holiday homes that are also used to generate income:

  • How many days was the property rented out and was the rent in line with market values?
  • Where do you advertise or rent and were any restrictions placed on tenants?
  • Have you, your family or friends used the property?

 Situations that are more likely to attract the ATO’s attention include the following:

  • Clients who only make the property available for rent outside peak holiday periods; and
  • Clients who claim that the property was genuinely available for rent during peak holiday periods, but the property wasn’t used privately and wasn’t rented during those periods.

You can only claim deductions to the extent that the holiday home expenses are incurred for the purpose of producing rental income. The ATO has also indicated that deductions might be limited if a property is only made available for rent outside peak holiday times and the location of the property (or other factors) mean that it is unlikely to be rented out during those periods.

The regulator is also likely to be suspicious if the owner claims that the property was genuinely available for rent during peak holiday periods but wasn’t deriving any income during those periods. This might indicate that the property was really being used for private purposes or that the advertised rental rate was unrealistic.

Whether a property is genuinely available for rent is a matter of fact. Factors that help demonstrate a property is genuinely available for rent include; it is available during key holiday periods, kept in a condition that people would want to rent it, tenants are not unreasonably turned away, advertised in ways that give it broad exposure to possible tenants, and the conditions are not so restrictive that tenants are unlikely to rent the property.




Let us advise you with your accounting and taxation needs!