The ATO is targeting holiday-home owners who are over-claiming on tax deductions for periods when their property isn’t being leased.
Some owners have been rejecting tenants so that their holiday home is available for them to use. They provide their accountants with authority to rent documents to make it appear that they are trying to rent the house. They then use the tax deduction to claim ongoing property maintenance costs to upkeep it for potential tenants.
For example, an investor rented out their holiday home to friends and family at a lower-than-market rate and tried to claim a deduction.
The ATO has risk detection models in place to alert them when taxpayers have unusual rental income and deduction patterns compared to taxpayers with properties in similar locations. The tax office is advising investors to keep thorough records and only claim on a deduction when they have made a reasonable effort to get tenants in their holiday home.