Holiday Homes and Mixed Use Rules
29 January 2017
HOLIDAY HOMES AND MIXED USE RULES
Are you looking at renting a holiday home?
If you use a holiday home for private use, as well as renting out, then the Mixed Use Rules apply.
Mixed Use Rules
1) Only apply if private and rental use. So, if you solely rent out and don’t use privately, then these rules don’t apply. Or, if you solely use privately, they don’t apply.
2) If income earned is less than 2% of the market value, then can’t claim a loss. For example, if property worth $500,000, would need to earn at least $10,000 income per year to be entitled to claim a loss (if one exists).
3) If income under $4,000 per year, can opt out and not return income or claim expenses.
4) Example: Say rented 50 days, used privately for 30 days and available to rent 285 days.
a) Old rules up to 31/3/13. Can claim 335 (50+285) days out of 365. So 92% of all expenses.
b) New rules from 1/4/13. Can claim 50 out of 80 (50 +30) days. So 63% of all expenses.
5) Need to keep a very good record of days used privately and by family.
6) Family use is included as private days. So from example above, if also used 10 days by family (whether they pay full market rate or not), then can claim 50/90 (50+30+10) = 56%.
7) If used for over 303 days per year, then mixed use rules don’t apply, i.e. if basically full time rental.
Next week I will cover holiday homes and GST Risk.