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Depreciation on Holiday Homes

Depreciation on Holiday Homes

Go on holidays and claim depreciation!

The ATO has recently announced a crackdown on property investors over-claiming deductions on holiday homes, this includes depreciation.

If you’ve been on holidays, it’s very easy to get caught up in the romance of owning your own holiday home.

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Purchase price, stamp duty and mortgages offset by the rental income can make it look good in the halo of optimism that comes with the first flush of real estate lust.

The “we have got to have it and we will make it work” compulsion is common when purchasing lifestyle properties.

Holiday houses can be depreciated if they are rented out to a third party but that doesn’t mean you can’t stay there when you want to.

As long as it’s available for rent most of the year you can block out a two-week period over Christmas and claim the depreciation pro rata.

You are still entitled to that deduction regardless of how many weeks the property is actually rented out, as long as it was available for the full 50 weeks.

TIP – Make sure you pro-rata any depreciation claim if you have used the property personally.

If you own a holiday home – make sure you start the ball rolling with a depreciation schedule by getting a quote here.

Have you ever thought about renting a room out in your house on Airbnb for a few extra bucks?

I know I have.

Airbnb, in case you haven’t heard, is a website that allows you to offer short term accommodation to others, or, you stay at someone else’s place.But what are the tax implications and can you claim depreciation?AirBNB Depreciation

The simple answer is Yes! If you rent out one bedroom of your 2 bedroom apartment… you can claim depreciation based upon a pro-rated ratio.

This tends to be based upon a floor area calculation and split between the portion set aside to produce income and that portion not.

BUT there is a big catch.

By renting out part of your house you will not be able to claim the full Capital Gains Exemptions that applies to your main residence.

So you need to do a cost-benefit analysis that takes into account rental income received, depreciation claimed and potential Capital Gains Tax (CGT) payable.

TIP: If you think the market has peaked and will be flat for a while – then this strategy could be worthwhile. Get the property valued at the point you start renting out the property and if the value is the same in 10 years? time…well, there would be no CGT payable anyway!

About Tyron Hyde

Tyron Hyde is the CEO of Washington Brown Quantity Surveyors. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences. Connect with Tyron on LinkedIn Watch Tyron Hyde speak at Washington Browns 40th Party