If you own a holiday home, you may be eligible to claim certain deductions on your tax return. However, the ATO has specific rules and regulations regarding claiming deductions on holiday homes.

To claim deductions on your holiday home, it must be rented out to tenants for at least part of the year. The amount of deductions you can claim will depend on the amount of time the property is rented out and the expenses associated with maintaining the property.

Expenses that can be claimed as deductions include:

• Interest on the mortgage
• Council rates and land tax
• Insurance premiums
• Repairs and maintenance
• Cleaning fees
• Advertising costs to find tenants
• Property management fees

However, if you use the holiday home for personal use, such as a family vacation, you cannot claim any deductions for that period. In addition, if the property is not available for rent for a significant period, such as being blocked out for personal use, the deductions may be limited or disallowed.

It’s important to keep accurate records of all income and expenses related to your holiday home, as well as evidence that it was available for rent during the times you are claiming deductions for.

Here’s an example of how claiming deductions on a holiday home might work:

Emily owns a holiday home in a popular tourist destination. She rents out the property for 6 months of the year and uses it for personal use for the remaining 6 months. During the rental period, she earns a total of $20,000 in rental income. She also incurs expenses for the property totalling $15,000, including interest on the mortgage, council rates, insurance premiums, repairs and maintenance, cleaning fees, advertising costs, and property management fees.

Emily can claim deductions for the $15,000 in expenses, which will reduce her taxable rental income to $5,000. She cannot claim any deductions for the 6 months she used the property for personal use.

If you own a holiday home and need tax advice, please contact our office at 03 9973 5905.