Holiday homes are homes that people own in order to holiday in and that are located in a different location to the home they usually live in. Popular holiday homes include sea (located on the coast), tree (located in the bush or country), and snow (located at snow fields).
Taxpayers who own holiday homes that are used for generating rental income (even on a part time basis) will be entitled to claim certain rental property expenses as a tax deduction.
The deductible rental expenses for a holiday home are the same as for a normal rental property, i.e. interest, depreciation, building write-off, rates, taxes, repairs, and management fees.
With income generating holiday homes, as the property is used for both income producing purposes and private purposes (e.g. own private use), the rental expenses incurred will need to be apportioned between the deductible percentage and non-deductible percentage.
To calculate the deductible percentage the expenses are normally apportioned based on a time basis. That is, the percentage of the year the property is rented or available for rent. So for example, if the property was rented or available for rent 40% of the time, then 40% of the rental property expenses would be deductible. The ATO deems a property available for rent if it is listed for rent with a real estate management agent.
If there is uncertainty about the correctness of claiming rental property losses on a holiday house, the ATO’s policy is to limit the deductions to the amount of rental income received.