We have recently helped a number of taxpayers who have had their rental property deduction claims queried, and often disallowed, by the ATO.

The property is usually in a ‘holiday town’ and is advertised as being available for rent all year but is also occasionally used by the taxpayer and their family to stay in. The taxpayer’s use is usually only a couple of weeks each year.

The ATO argues that the taxpayer is only allowed to claim deductions for interest etc. up to an amount equal to the actual income derived. So if the property is actually only rented out for 6 weeks and derives rent of $3,000 then the ATO says the taxpayer is only allowed to claim deductions of $3,000. This is despite the fact that the property was available for rent for 50 weeks of the year (the taxpayer staying in it the other two weeks).

The ATO argues that the property was not genuinely available for rent even though it has been advertised on the internet and listed with a real estate agent. The ATO tends to rely on very old Board of Review and Administrative Appeals Tribunal cases that have different facts to support its view. But other, more recent cases, indicate that provided the property is available for rent (e.g. listed with a real estate agent for rental) then the expenses incurred can be claimed for that period as well as for the period the property was actually rented out.

We believe the ATO is taking too harsher stance in these circumstances. The cases the ATO relies on arose in the pre-internet era. We reject the ATO’s view that advertising a property on the internet is not sufficient for the property to be genuinely available for rent. Hopefully there will be a test case in the near future.


If you or your clients need help in challenging the ATO’s disallowance of expenses, or in responding to the ATO’s position paper, please contact Rob Warnock or Patrick Cussen on 1300 267 529.


Below is a link to the ATO’s website page ‘Focus on holiday home rentals’