Through the use of sophisticated data-matching technology, the ATO is able to track holiday houses rented on common sites such as Stayz and Airbnb that derive income.
Specifically, the ATO is interested in periods of no tenancy – with taxpayers needing to prove their home was available and wasn’t used for private purposes if they are trying to claim a deduction.
Craig Barry, director of tax services at William Buck, said the onus of proof is on the taxpayer, meaning they need to prove a loss of income.
“Increased sophistication of data-matching means the ATO can compare your property against other holiday rentals in the area. If you fall out of their bell curve, you could be their primary target for a review or costly audit,” said Mr Barry.
“All powers will be used to ensure the legitimacy of your records, including demanding access to bank account records for proof that all rental amounts received were declared as income,” said Mr Barry.
Tax legislation currently allows deductions for holding costs, such as interest and rates, incurred by property owners during periods of vacancy where the owners are genuinely seeking tenants.
If the property is being used for personal purposes, or is otherwise not genuinely available for rent, an appropriation of proportion of those holding costs are not considered deductible.
“The ATO is interested in properties not ‘genuinely available for rent’, which makes for an interesting proposition – proving a negative.”