ATO sharpening their focus on holiday rental homes

The Australian Taxation Office (ATO) is setting their sights on the large number of mistakes, errors and false claims made by rental property owners who use their own property for personal holidays.

Over the next few years, it intends to regain more than $1 billion in losses from wrongly claimed personal deductions, especially from negative gearing deductions for holiday homes.

Incorrect holiday rental deductions behind a $9 billion tax gap

ATO revealed that incorrectly claimed rental deductions are among the key reasons behind the annual $9 billion tax gap. In last year’s Budget, the ATO was granted $130 million over four years to increase its monitoring of personal tax deductions and will focus on rental deductions. With this extra scrutiny, revenue is expected to climb by $1.1 billion.

What can be claimed?

Current negative gearing legislation allows losses from rental properties to be claimed to offset an income-tax bill. However, many holiday-home owners claim deductions when they were being occupied by family or relatives and friends for free.

In other cases, these owners claimed deductions when their holiday homes were not available for rent, or were advertised only by word of mouth or outside of holiday seasons. In some situations, homes were inaccessible or advertised with sky-high rents that decreased the chances of the property being rented.

What does the ATO say about it?

Assistant Commissioner Kath Anderson said, “You can only claim deductions for your holiday home if your property is genuinely available for rent. You cannot claim for times when you were using it for your own personal holidays or letting friends and family stay rent-free. It’s not ok to expect everyone else to pay for your holiday.

“Incorrect rental property claims will not go unnoticed. Whether it is a genuine mistake or a deliberate attempt to over-claim, new technology, data matching and other systems allow the ATO to identify unusual claims. Ms Anderson said.

“Where something raises a red flag, it will be investigated. Property owners whose claims are disproportionate to the income received can expect scrutiny from the ATO.”

Ms Anderson said all rental property owners should double-check their claims before lodging their tax return, even if submitting through a tax agent.

“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 at market rates,” Ms Anderson said.

“Be sure to keep accurate records of the income you receive from your rental property, expenses you incur, and evidence of the property being rented or genuinely available for rent at market rates. You should also keep records of who stayed at the holiday home and when, including the time you and your family stay at the property.”

Share this with your friends and family who are owners of Holiday rental properties!


We help busy professionals like you every day. Book in a free Financial Health Check at or call us on 3396 8518

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square