If you own a rental property, holiday home or short-term accommodation property, it is important to understand what income needs to be declared and which expenses can be claimed.
The ATO has recently released updated guidance for rental property owners, including guidance around holiday homes and short-term rental properties. This is particularly relevant for property owners who use a property privately for part of the year, rent it out for short stays or make it available through platforms such as holiday letting websites.
One of the key messages is that rental income needs to be declared. This includes income from long-term tenants, short-term stays and other arrangements where someone pays to use the property.
When can expenses be claimed?
In general, rental property expenses may be deductible when the property is rented out or genuinely available for rent. However, the situation can become more complicated when the property is also used privately, reserved for family or friends, or only available for rent for part of the year.
For example, if a holiday home is used privately for some of the year and rented out for the rest, expenses may need to be apportioned. This means only the portion that relates to income-producing use may be deductible.
Areas to review include:
- Whether all rental and short-term accommodation income has been declared
- Whether the property was genuinely available for rent during the period expenses are being claimed
- Any private use by owners, family or friends
- How expenses have been apportioned between private and income-producing use
- Whether interest, repairs, maintenance, cleaning, rates, insurance and management fees have been recorded correctly
- Whether records are sufficient to support the claims being made
Short-term and holiday rental properties can be particularly important to review because the pattern of use may change throughout the year. A property may be rented out during peak periods, blocked out for personal use at other times, or offered at rates or conditions that make it less genuinely available to the public.
The ATO expects property owners to keep clear records, including details of rental income, expenses, dates the property was rented, dates it was available for rent and any periods of private use. This information can make a significant difference to how income and deductions are reported.
If you own a rental property, holiday home or short-term accommodation property, now is a good time to review your records before preparing your return. Getting advice early can help ensure income is reported correctly and deductions are claimed appropriately.
If you are unsure how the rules apply to your property, speak with the team at DGL Accountants before lodging your return.