ATO homing in on holiday rental compliance after too many crafty claims by taxpayers

In the lead up to the June long weekend the ATO is reminding taxpayers that it’s paying close attention to rental properties located in popular holiday destinations around Australia.

Assistant Commissioner Kath Anderson said that last year the ATO identified a large number of mistakes with deductions for rental properties, particularly with regards to holiday homes.

“We’ve noticed some people are claiming deductions for holiday homes even where the property is not genuinely being rented out, or genuinely available for rent,” Ms Anderson said.

“There’s no problem with people using their rental property for their holiday, but holiday home owners need to remember they can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.”

Property owners also need to understand that if they rent their property at a discounted rate, or ‘mates’ rates’ they can only claim deductions equal to the amount of rent charged.

“One taxpayer had to pay the ATO back over $45,000 in tax from deduction claims made for a holiday home they were renting out to friends and family below the market rate.”

Ms Anderson said the ATO is focused on using data to identify errors.

“Property owners should be aware that incorrect rental property claims will not go unnoticed.

“Technology enhancements and extensive use of data is allowing us to identify incorrect or suspicious claims.

“We also have a good idea of the locations likely to be used for holiday homes.”

Ms Anderson said that all rental property owners, particular those who rent out holiday homes, should always double-check their claims before lodging their tax return, and follow a couple of simple rules.

“Firstly, make sure that you declare all rental income and only claim deductions for periods that the property is rented or was genuinely available for rent.”

“Secondly, make sure you have accurate records of expenses, and strong evidence of the property being rented or genuinely available for rent at market rates.

“Advertising through a real-estate agent or an online site is not always enough evidence to demonstrate that a property is genuinely available for rent.”

For more information on Holiday homes, visit ato.gov.au/holidayhomes

For more general information on rental properties, visit ato.gov.au/rental