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ATO Turns Up the Heat: Avoid Excessive Claims on Your Holiday Home

2023.02.10 - ATO Holiday Home Deductions Photo - Dolman Bateman-1The Australian Taxation Office (ATO) has recently announced that it will be cracking down on holiday homeowners who claim excessive deductions for their properties. This crackdown is part of the ATO's wider efforts to reduce tax avoidance and ensure that all taxpayers are paying their fair share.

Holiday homeowners in Australia are entitled to claim deductions for expenses related to their property, such as interest on mortgages, repairs, and maintenance. However, the ATO has identified that many holiday homeowners are claiming excessive deductions for properties that are not being used primarily for rental purposes. In other words, they are using their holiday homes as a tax loophole to reduce their taxable income.

Here are some tips for holiday homeowners to avoid excessive claims and stay compliant with the ATO:

  1. Keep accurate records: It's essential to keep accurate records of all expenses related to your holiday home. This includes receipts, invoices, and bank statements. This will help you to ensure your claims are reasonable and supported.
  2. Claim only relevant expenses: You should only claim deductions for expenses that are directly related to renting your holiday home and not for personal use. This includes mortgage interest, repairs, and maintenance.
  3. Make sure your property is available for rent: Your holiday home must be available for rent to claim deductions. If it is only being used for personal purposes, no deductions can be claimed. Your property is considered available to rent if either of the following applies:

    a. A tenant is renting the holiday home
    b. The property is being advertised for rent (such as Airbnb, Stayz or through a real estate agent) and have conditions that make a tenant likely to rent the property.
  4. Decline in value of plant and equipment: You can also claim deductions for the decline in value of plant and equipment, such as furniture and white goods. However, you must ensure you are only claiming the decline in value for items that are being used in the property and not just for personal use.
  5. Seek professional advice: If you are unsure about the deductions you can claim, it's a good idea to seek professional advice from a tax accountant or financial advisor. They will be able to advise you on your obligations and ensure you are operating within the law.
  6. Be mindful of the ATO's guidelines: The ATO has published guidelines on the deductions that can be claimed for holiday homes. It's important to familiarise yourself with these guidelines to ensure you are not making excessive claims.
  7. Avoid making false claims: Making false claims or engaging in tax evasion is illegal and can result in penalties, fines, and legal action. It's important to be truthful and accurate in all claims made to the ATO.
  8. Stay up to date: The ATO regularly updates its guidelines and policies. Stay up to date with any changes to ensure you are operating within the law.
By following these tips, holiday homeowners can avoid making excessive claims and stay compliant with the ATO. By doing so, they can avoid penalties, fines, and legal action, and ensure they are paying the right amount of tax. 

Want expert advice on managing your holiday home and complying with ATO guidelines? Contact us today to become a client and receive personalized support and guidance tailored to your specific needs. Let us help you avoid costly mistakes and make the most of your investment.

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This blog has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances, please feel free to contact us on 02 9411 5422. We can help make sure the right method is used to give you the maximum possible tax deduction associated with any of these methods.