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Claiming tax deductions for your holiday house

Posted on 10 August '15 by , under General News.

Leasing out your holiday house to others can make owning the property more affordable.

The principles that apply to an investment rental property also apply to leased or rented holiday houses. This means owners are entitled to claim expenses for the property based on the proportion of the income year when it was rented or available for rent. Some deductible expenses include:

  • Property insurance

  • Interest on any funds borrowed to purchase the house

  • Repairs and maintenance costs (such as materials, council tip fees, trailer hire)

  • An agent’s commission

  • The decline in value of depreciating assets

  • Capital works

However, if owners use the holiday house during the year, they cannot claim any deductions for the expenses that relate to that private use. This includes use by other family members, relatives or friends. For example, if the house is available to rent for most of the year, but two weeks are unavailable for personal use, then that two weeks must be ignored when calculating deductions.

If owners choose to charge relatives and friends a lower rent rate, the ATO will only allow deductions that are confined to the amount of rent received for that period. However, if the rent received surpasses the allocated rental fees for that period, then the total expense may be claimed.

Owners can also make claims for feasible travel costs if any travel is made to inspect, maintain or repair the holiday house. The provision is that travel must be solely for these purposes, and not combined with simply visiting the property to have a holiday.