Holiday homes that you do not rent out
If you own a holiday home and do not rent out the property, you do not include anything in your tax return until you sell it.
You will have to keep records from the time you purchase the property until the time you sell it to be able to work out the capital gain or loss when you sell.
- Your home and other real estate
Holiday homes that you rent out
The principles that apply to a rental property also apply to a holiday home if it is rented out.
If you rent out your holiday home, you can claim expenses for the property based on the proportion of the income year it was rented out or was genuinely available for rent.
You have to apportion your expenses if the property is – used:
- for private purposes for part of the year – such as when you use it yourself, or allow your family, relatives or friends to use it free of charge
- by family or friends for part of the year and you charge them less than market rent.
Holiday homes that are not genuinely available for rent
Factors that may indicate a property is not genuinely available for rent include:
- it is advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised
- at your workplace
- by word of mouth
- outside annual holiday periods when the likelihood of it being rented out is very low
- the location, condition of the property, or accessibility to the property, mean that it is unlikely tenants will seek to rent it
- you place unreasonable or stringent conditions on renting out the property that restrict the likelihood of the property being rented out – such as
- setting the rent above the rate of comparable properties in the area
- placing a combination of restrictions on renting out the property – such as requiring prospective tenants to provide references for short holiday stays and having conditions like “no children” and “no pets”.
- you refuse to rent out the property to interested people without adequate reasons.
These factors generally indicate the owner does not have a genuine intention to make income from the property and may be reserving it for private use.
Claiming deductions for a holiday home you both rent out and use privately
If you rent out your holiday home and also use it for private purposes, you cannot claim deductions for the proportion of expenses that relate to the private use.
Your expenses are apportioned on a time basis where the property is used for private purposes for part of the year.
Private purposes include use by you, your family, your relatives and your friends free of charge.
If your holiday home is rented out to family, relatives or friends below market rates, your deductions are limited to the amount of rent received for that period.