The Australian Taxation Office (ATO) is planning to closely watch the landlords with holiday homes and catch those who cheat and unfairly claim tax deductions to fund their holidays. According to Chan & Naylor Accountants Pymble, these holiday home owners are allowed to claim deductions if they are renting the property out for a holiday but plenty of owners have been falsely claiming and receiving deductions, unfairly profiting from the legislative loophole.
This time though, landlords have to make sure that they are claiming legitimate deductions. Holiday home repairs, maintenance, cleaning and council rates can be claimed as long as the property is rented out to the public except family or friends who rent at mates rates. In this case, deductions claimed should not exceed the total income received.
Those who claim deductions on a holiday-let property used by themselves, family or friends and do not advertise the property to the public may get in trouble. Negative gearing is a good strategy to help with the affordability of acquisition and management of property assets but claiming deductions should be done with due diligence. To be able to claim deductions for a holiday home, the property must be available as a holiday rental, advertised appropriately with reasonable rental rates.
The ATO will use new technology, as well as data matching and online research to check up on holiday home owners and make sure that the properties are used according to their tax returns. Remember that good record-keeping and substantiation of claims can help you avoid getting into hot water with the ATO when it comes to claiming deductions.
It is important that records are detailed and accurate of all income and expenses from the property with adequate proof that it’s been available for rent at rates in line with the market. It’s also good to keep track of when family and friends have used the property so your accountant can separate the private portion of deductible items and make sure only legitimate claims are lodged.
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