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Legislation Loop Hole allows Employees to Salary Sacrifice 100% of Rental Expenses |
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Do you know how much leave you are entitled to this Christmas? |
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Holiday Home Tax Considerations and Deductions It’s almost Christmas time, and it’s summertime too! At this time if the year it is likely that many of you are making plans to get away for a while. If you have a holiday home that is rented out at other times during the year, but are planning to stay there yourself over the Christmas break, it is important to be aware that there are some tax implications that may be associated with it. Tax Deduction Implication If you rent out your holiday house for the whole year, it is important that you pay the necessary taxes on any income that is earned from it. Of course, upon declaring the rental income you are then entitled to claim all of the relevant rental property deductions for that year, including interest charges, borrowing expenses, depreciation of an asset within the rental property, the cost of any repairs that are carried out as well as the capital works deduction. However, if for part of the year (e.g. Christmas time) you use the holiday home for your private purpose, you must then apportion your deductions on a daily basis, as you are only allowed to claim deductions for the time that the property is producing income. If you stay in the house for 2 months, that is 60 days of the year, then you can only claim approximately 83% of the total eligible deductions for the year (305/365*100). Although, for expenses such as repair and maintenance costs, if this is necessary due to damage made during the rental period, the costs may be fully deductible. Holiday letting is different from other rental properties in that the rental and occupancy rates fluctuate depending on the time of year. During popular and high demand periods, such as public holidays, chances are that the property is booked out and can make substantial income but during other times it may have significantly lower occupancy rates. As a result, the way in which the rental period is determined for tax purposes is very important. If the conditions below are met and the property is not used for private purpose, the period of no occupancy can be counted for deduction purposes as long as:
Travel expenses that are incurred in relation to the inspection of a holiday rental property must be apportioned if the trip is combined with a holiday or other private activities. For example, if you buy a flight ticket to travel from your Sydney home to Brisbane, for the purpose of holidaying as well as the inspection of your rental property, you are not entitled to claim the cost of the flight ticket. However, you can claim your travel fees between your Brisbane accommodation and your holiday home, as well as part of your accommodation expenditure. Capital Gains Tax Implication When you sell your holiday home, it will be subject to capital gains tax, unless you claim it as your primary residence. However, please remember you can only claim one property as your primary residence at any one time. These are just some examples of the tax considerations when owning and using a holiday home. If you have a holiday rental property and would like personalised advice on how to legally minimise the tax you pay contact The Quinn Group on 1300 QUINNS or click here to submit an online enquiry.
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Disclaimer: The contents of this document titled “The Quintessential Brief” (the ‘Material’) are provided as general information only. It is not intended to be given as advice and should not be relied upon as such. If you are concerned about any issue raised by the Material then you should seek your own professional advice. No warranty is given in relation to the accuracy, currency or completeness of the Material. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice. Where applicable, liability is limited by the NSW Solicitors Scheme under the Professional Standards Act 1994 (NSW), and other relevant state legislation. The Quinn Group respects your privacy. Should you not wish to receive this newsletter in the future please contact us on 1300 784 667.