The ATO will be paying attention to excessive deductions claimed for rental properties, especially those located in popular holiday destinations around Australia.

The ATO have identified instances where taxpayers are claiming rental deductions for holiday homes that appear to be higher than expected when compared to the rental income being reported.

Factors the ATO consider which may indicate a property is not genuinely available for rent include:

  • if it is advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised to family members.
  • the location, condition of the property, or accessibility to the property, mean that it is unlikely tenants will seek to rent it;
  • the owner places unreasonable or stringent conditions on renting out the property that restrict the likelihood of the property being rented out – such as:

– setting the rent above market rate

– placing a combination of restrictions on renting out the property – such as requiring prospective tenants to provide references for short holiday stays and having conditions like “no children” and “no pets”

  • a property owner refuses to rent out the property to interested people without adequate reasons.

If a property is rented at below market rates, deduction claims must be limited to the income earned while rented. The ATO has also reminded taxpayers to keep accurate records and evidence of claims.

Whether a property is a holiday home or not, the owner can claim reasonable costs that relate to them inspecting the property, maintaining it and making repairs to the property.

Where a holiday home, is rented out for only part of the year, costs such as repairs and maintenance can only be claimed based on the proportion of the income year the property was rented out or was genuinely available for rent.

Other ATO focus areas concerning rental properties include:

  • husbands and wives splitting rental income and deductions for jointly owned properties that is not supported;
  • claims for repairs and maintenance shortly after the property was purchased;
  • costs to repair damage, defects or deterioration existing on purchase, or renovation costs, can’t be claimed as an immediate deduction. These costs are deductible over a number of years; and
  • interest deductions claimed for the private proportion of loans.


Please contact Rubiix to discuss your situation.


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