Hi Guys,
Long time reader, 2nd time poster.
Could anyone shed any light on the tax implications of living in an IP for a short period of time, approximatley two weeks p.a. The scenario would be purchasing a short term rental IP on Gold Coast, QLD and using it for holidays when it is vacant. Will the loan still be 100% tax deductable?
Any other remarks on short term rentals are welcome too.
Cheers,
AndrewHi Andrew,
I recently read that you need to be careful buying an IP that would also act as a holiday home for yourself.
The reason being that if your IP is only an ideal place for tenants looking for a holiday home then you're essentially going to increase vacancy rates by using it yourself. Say for example that demand for the property was high in the summer (considering it's on the Gold Coast). You'd probably want to stay there during the summer yourself, thereby losing a prospective tenant.
You'll have to be pretty comfortable with that fact before you buy.
Cheers
Hi Andrew
I'm not an accountant but I think that your deductions will be reduced by 2/52.
Cheers
K
The deductions are reduced by the amount of time the property is not available for rent. In your example, the deductions would be reduced by your private use amount of 2 weeks use/52 weeks, or 3.8%.
This is subject to the rate being applicable for the whole year. If you used it in a peak period, the % adjustment would be much greater.
If only using it when vacant then you may be able to claim deductions for travel expenses as long as you justify a reason such as inspections or maintenance. I plan my trips back to oz normally around end of leases when tenants are thinking of moving out and ask the pm to let prospective tenants know the place is available after I've been. This also allows time to get a feel for the area and do any odd jobs that might help improve the place and increase rent further.
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