ATO cracks down on expenses being claimed for holiday homes and Airbnb properties
As part of its increased focus on rental properties, the ATO is targeting taxpayers that are failing to report rental income or not calculating their rental property deductions correctly. In particular, the ATO has set its sights on the following:
- Holiday homes – The ATO is finding that taxpayers are overclaiming deductions relating to holiday homes.
- Rooms or homes rented out on a short-term basis through an online accommodation platform (e.g., Airbnb, HomeAway and Flipkey)
Broadly, if a taxpayer rents out all or part of a house or unit, any payments received are included in the taxpayer’s assessable income. Accordingly:
- the income received must be included as rental income on the taxpayer’s income tax return; and
- expenses incurred in deriving that income can be claimed as deductions.
Where the entire property is rented, or genuinely available for rent, throughout the entire income year, holiday homes, and properties rented out through an online platform, are effectively treated no differently to any other genuine rental property. However, these properties are often also used for purposes other than deriving assessable rental income. In such cases, taxpayers are required to apportion any expenses incurred that relate to the property, to ensure deductions are only claimed to the extent the property is used to produce assessable income.