If you own a holiday home, you may rent it out during times when you’re not using it. This article highlights some tax considerations you should be aware of. If you have any concerns, it’s advisable to seek professional advice.

Income and Expenses

When you rent out your holiday home, the rental income you receive is taxable. You can claim expenses related to the property as long as they are incurred in earning that rental income. However, your expenses may need to be apportioned in the following situations:

  • Your property is available for rent for only part of the year.
  • You use the property yourself for part of the year.
  • Only a portion of your property is rented out.
  • You charge family or friends less than the market rent to use the property.

Expenses that are solely related to renting out your property do not need to be apportioned, as they are fully deductible. These expenses may include:

  • Real estate commissions
  • Advertising costs for finding tenants
  • Phone calls to tradespeople for repairs caused by tenants
  • Rubbish removal costs left by tenants

On the other hand, no deductions can be claimed for expenses related solely to periods when the property isn’t genuinely available for rent, is used for private purposes, or pertains to parts of the property that aren’t rented out. For instance, expenses for cleaning your holiday home after you, your family, or friends have used it or for repairs for damage you caused while staying there are not deductible because they relate to private use.

Expenses may be deductible for periods when the property is not rented out, but only if it is genuinely available for rent.

Is the Property Genuinely Available for Rent?

To determine if your property is genuinely available for rent, consider the following factors that may indicate it is not:

  • The property is advertised in ways that limit its visibility to potential tenants, such as being promoted only at your workplace or through restricted social media groups.
  • The property’s location, condition, or accessibility make it unlikely that tenants will seek to rent it.
  • You impose unreasonable or stringent conditions that decrease the likelihood of renting out the property, such as setting the rent significantly above the market rate for comparable properties in the area.

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