Tax office crackdown on holiday home landlords

As many geared up for an Australia Day long weekend, the tax office announced a major crackdown on people renting out their homes in tourist destinations.

Inspectors are contacting property owners in the top 500 vacation postcodes to remind them of the rules for claiming tax deductions and to warn them that the taxman could come knocking if they’re asking for too much, in what’s proving a holiday mood dampener.

“They’re checking they’re working out their deductions correctly, and that they’re not claiming them for the periods they’re using the house themselves or are renting them  for reduced prices to family and friends,” says Stuart Wagschall of independent accounting firm Thomas Davis and Co.

“They’re also concerned that people aren’t apportioning the deductions to the partner who earns more, or less, to make the most of their tax position, instead of the rules’ 50:50. It’s acting like a warning to put their houses in order before there might be repercussions.”

Holiday house owner Derryn Timms, who rents out her four-bedroom house “Char-ree-leera” in the coastal town of Eden, halfway between Melbourne and Sydney, is determined not to become alarmed. 

With her main home in Melbourne and her daughter living in Sydney, it’s always been the perfect base for the family to get together, as well as to earn extra income outside of the time they want to use it. 

“We’ll be handing on their letter to our tax accountant,” says callisthenics teacher Timms, 59.

 “We won’t think about it. It’s something we don’t want to know about; let the experts sort it out.

“We’ve only been renting the house out for 18 months now and we’ve had an extremely busy season which has been great, with people coming to stay here from both Sydney and Melbourne, and an increasing number from overseas too. It’s lovely to know so many people are discovering our paradise. There are better things to think about than tax.”

 There are likely to be plenty of other owners, however, who will be panicking. It’s an industry for both holiday and short-term rentals that, in a 2014 BIS Shrapnel report, was said to generate an estimated $31 billion in economic activity and support 238,000 jobs.  

 Property Owners Association of Australia NSW president John Gilmovich says at a time when there’s talk about tax reform for property owners, there’s bound to be plenty of confusion about the rules.

“I think there would be certain property owners who’ll fall into that category,” he says. 

“There’s also confusion about the whole Airbnb debacle and tax too, and we’ve been lobbying for regulation on that market, like the regulation that exists for other property investors. But it will be difficult as there are no central registers.”

More Australians than ever before are now renting out their homes because of the online networks, of which Airbnb is only one. It may well be that some of those will be caught out.

Andrea Wilson, chairperson (Victoria) of the Holiday Rental Industry Association, says that people often come into the industry unclear of the tax regulations. “I’d advise people now to speak to their agents and seek professional advice,” she says. 

“We have guidelines too that will help, although they vary from state to state, and situation to situation.”