How to Make Sure That You Account for Taxes Correctly When You Invest in a Holiday Home


If you have been told that you need to diversify your investment strategy, you may have decided to purchase a holiday home and put it on the rental market for additional income. This can be a great way to make some money and boost your portfolio, so long as you approach it correctly and specifically, are careful when accounting for tax. Should you be worried that the ATO may look at this critically, in light of recent developments?

Key Considerations

Some people believe that the tax authorities are "cracking down" on people who have a holiday home that they make available for rent during certain periods of the year. In order to ensure that you comply, you must be very clear about this property and just how much of it is actually available for rental. In short, you have to make a valid effort to rent out the property, if you want to claim any associated expenses on your annual return.

Proactive Advertising

Remember, you're only able to claim deductions for the weeks when the property was on the market and was available to other people. Be careful here, as it is best if you employ some proactive efforts to rent out the home, such as the placement of ads on a holiday website. If the ATO does not think that you are serious about it, your deductions might not qualify.

Good Condition

You also have to ensure that the property is in a good enough condition to be valuable on the rental market. For example, is it in an enticing location, relatively easy to get to and is it kept in great repair?

Real Availability

In the past, some people may have made a token effort to advertise their home, but imposed some unreasonable conditions so that they didn't actually have to accept any renters. If the ATO can see that you are putting an unreasonable premium on your rental rates in this fashion, then you will likely fail the "availability" test.

Revenue Test

It is certainly okay for you to allow family or friends to stay at your property at no charge when you're not there, but you cannot include these particular weeks when calculating deductions for your return. If you do charge a nominal rent in the hope of bypassing this rule, the ATO will clamp down on it.

Doing It Right

To make sure that you are getting the most out of your investment and keeping the ATO happy, make sure that you talk with an accounting professional.


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