Taxpayers should remember that they can only claim deductions for holiday home expenses to the extent they are incurred for the purpose of gaining or producing rental income.
They need to consider the following in determining whether the deductions they wish to claim are valid rental deductions:
- How many days during the income year did they use or block out the property for their own use? Taxpayers cannot claim deductions for the periods the property was used or blocked out by them.
- How and where did they advertise the property for rent, and is the rent in line with market values? If they only used obscure means of advertising, or put unreasonable restrictions or conditions in the advertisement, they may not be entitled to claim deductions.
- Will any restrictions, or the general condition of the property, reduce interest from potential holiday makers? If their property is not in a tenantable condition, they may not be entitled to claim deductions.
- Has the taxpayer or their family or friends used the property? Taxpayers cannot claim for periods of private use or when the property is kept vacant for personal reasons.
- Is any part of the property off limits to tenants? When taxpayers claim deductions, they should ensure they calculate and apportion deductions in relation to the part of the property that is available for rent.
