The ATO has published a warning to taxpayers, stating that it is setting its sights on false or mistaken deductions claimed in respect of holiday homes that are not actually available for rent, or are only available to friends and family.

The ATO reminds taxpayers that while private use by family and friends of a holiday home is entirely legitimate, it reduces your ability to earn income from the property which reduces your available deductions. Where a taxpayer’s claimed deductions are disproportionate to the income received from the property, this is likely to trigger ATO investigation activity.

In addition to holiday houses, the ATO is focusing on other properties that are not rented or genuinely available for rent. Factors that will be taken into consideration in determining whether a property is genuinely available for rent include unreasonable conditions placed on prospective renters, rental rates set above market rates and failing to advertise the property in a way that targets people who would be interested in it.

This announcement serves as a timely reminder to taxpayers and their advisors of the need to maintain sufficient records. While the primary focus should be on keeping records of expenses, income and the efforts taken to rent a property, taxpayers should also keep accurate records of the times that the property is used personally by the taxpayer or their family and friends.