Investing in a holiday home can be exciting, offering both lifestyle benefits and the potential for tax advantages. But whether you’re looking at a standalone house or a unit, it’s important to understand how the Australian Taxation Office (ATO) treats holiday properties so you can stay compliant and avoid surprises.
Key Tax Considerations For Holiday Homes
Generally, only costs directly related to generating rental income are deductible. For example, you can usually claim expenses like:
- Repairs and maintenance (fixing leaks, painting, servicing appliances)
- Loan interest, council rates, insurance, and utilities
- Property management fees
- Depreciation on fixtures and fittings (e.g. ovens, carpets, air conditioners)
However, you cannot claim expenses from personal use. Cleaning after your own stay or fixing damage from family holidays won’t qualify. Large improvements that add value, such as a new deck or roof, are capital works and must be depreciated over time rather than deducted immediately.
Holiday Apartments In Commercial Complexes
If you own an apartment in a commercial holiday complex, it is still classed as a residential rental property for tax purposes. This means:
- Rental income must be declared in your tax return.
- Deductions may apply, provided the property is genuinely available for rent.
- GST does not apply to rental income, and GST credits cannot be claimed.
Even though these apartments sit within a commercial setting, the ATO treats each one as a residential property.
Apportioning Expenses
If you use the property personally as well as renting it out, expenses must be split. For instance, if the property is rented for six months and used by you for the other six, only half of the expenses can be claimed. The ATO’s examples and guidelines are helpful in working out the right balance.
Record-Keeping Matters
Accurate records are key. Keep track of rental income, expenses, and the dates the property is rented versus used privately. Retain all receipts and invoices-these will help substantiate any claims you make.
How Your Accountant Can Help
Your accountant can:
- Identify legitimate deductions
- Guide you on apportioning expenses correctly
- Advise on depreciation claims
- Ensure your reporting is accurate and compliant
