ATO crackdown targets holiday homes used privately during peak seasons

“Only expenses such as advertising costs, cleaning costs after a guest stay, and booking fees and commissions will be deductible,” it said.

The ATO said if a holiday home was advertised for rent for more than half of the year, but was not available for all or most of the holiday peak season, this would indicate that its main purpose was not to produce their assessable income.

The peak seasons may include Easter, Christmas, New Year’s, and school holidays, but will also depend on the property’s location and when it might be desirable for holidays or recreation.

“For example, a property in a coastal or resort area may experience peak demand during the summer season, while a property near a ski field may have peak demand in winter,” the ATO said.

On the other hand, a holiday home located in the central business district of a capital city may see peak demand influenced heavily by major events such as festivals or sporting fixtures.

Holiday home investors will only be allowed minimal private use of the property during off-peak seasons, such as a week or a few weekends when there are no bookings.

However, investors need to remember they cannot claim expenses for the time they were using the property for private use.

The news followed the ATO clarifying its guidelines around rental income ahead of the end of the financial year, ensuring property owners declared all income, claimed the right deductions, and remembered to keep good records.

CPA Australia tax lead, Jenny Wong, told SPI that the ATO had a sharper focus on ensuring that short-term rental properties were genuinely used to produce income rather than for private use.

“If a property is used for both rental and private purposes, you can’t just claim 100 per cent of the expenses – it needs to be split appropriately,” she concluded.

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