Australia Tax Office (ATO) increases focus on rental property deductions


The ATO has advised that it will have an increased focus on rental property deductions and is sending out letters reminding owners to only claim deductions for the period that the holiday home was genuinely available for rent.

The ATO is paying closer attention to excessive deductions claimed for holiday homes in 2015, and is actively educating rental property owners about what they can and cannot claim.

To avoid making mistakes on your tax return property owners should

  • retain accurate records to ensure that the right amount of income is declared and to hold documentary evidence for all claims made
  • only claim deductions for that period the property is genuinely available for rent

The ATO advised that it recently amended a taxpayer’s return to disallow deductions claimed for a holiday home after it was identified:

  • the taxpayer rented the home to family and friends during the year at less than market rate;
  • other than for a brochure only available at the taxpayers’ business premises, there were no realistic efforts to let the property;
  • the advertised rent for surrounding properties was much higher; and
  • the income pattern did not match the advertised rate, or the requirement for a five-night minimum stay.

It was decided by the ATO that the property was mainly used by the taxpayer, and deductions were limited to the amount earned from family and friends.

Note: All of the comments in this publication 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 circumstance. All content has been sourced from the National Tax and Accounting Association & issued by Leigh Barker West Pennant Hills.