Many of us look forward to an annual getaway, either to the beach or the bush, as the best way to unwind and re-charge after another tiring year. For many Australians having a beach shack or bush retreat can be made more affordable by leasing out their properties to other holiday makers.
Investing in holidays properties is gaining popularity due numbers of benefits such tax and depreciation benefits.
In thisarticle we will cover following holiday rental property tax deduction questions:
- Is my holiday property eligible for tax deductions?
- List of expenses which can be claimed as a tax deduction for holiday property?
- Do I need to pay Capital Gain Tax (CGT) on selling my holiday rental property?
- Factors that can make my holiday property ineligible for tax deductions?
1. Is my holiday property eligible for tax deductions?
Holiday property become eligible for tax deductions under following two scenarios
A)For the period when the holiday property is advertised and available for rent, plus
B) For the period when the holiday property is rented out.
2. List of expenses which can be claimed as a tax deduction for holiday property?
If you own an Aussie holiday rental property you can claim valuable rental property tax deductions that make it easier – and financially positive – to own and operate your holiday rental. Below is the list of deduction you can claim:
- Maintenance & repair costs
- Yard maintenance
- Advertising costs
- Pest control
- Body corporate fees
- Council rates
- Property insurance
- Interest (on the funds borrowed to purchase the home)
- Depreciating assets
- Capital works deductions
- Owner traveling expenses for inspection or repairs
- …and more.
3. Do I need to pay Capital Gain Tax (CGT) on selling my holiday rental property?
Unlike main residences, capital gains tax (CGT) is payable on gains received from the sale of holiday home investments. However, you can minimise these costs with some savvy recordkeeping. When ascertaining the cost base of your home to determine CGT, be sure to factor in the legal fees, finance fees, maintenance and running costs of the property. This helps reducing the amount of CGT you’ll pay.
4. Factors that can make my holiday property ineligible for tax deductions?
Factors that the Tax Office can be on the lookout for include a holiday house that is:
Advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised
- advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised
- at you work place or by word of mouth
- outside annual holidays periods when the likelihood of it being rented out is very low
- that it is unlikely tenants will seek to rent it due to its condition or location
- setting the rent above the rate of comparable properties in the area
- placing restriction such as no children or no pets, asking reference for even short stays
- refusing to rent out to interest people without adequate reasons