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Edited version of private advice
Authorisation Number: 1051628700035
Date of advice: 28 January 2020
Ruling
Subject: Rental property - deductibility of expenses - decline in value - capital works
Question
Are you entitled to claim deductions for rental property expenses incurred in relation to the property under section 8-1, Division 40 and Division 43 of the Income Tax Assessment Act 1997 apportioned for private use?
Answer
Yes.
It is accepted that the property is genuinely available for rent and that active efforts are being made to let the property at market rates. Further information about renting out holiday homes can be found in Taxation Ruling IT 2167 or by searching 'QC 45076' on ato.gov.au.
This ruling applies for the following periods
Year ended 30 June 2017 to year ending 30 June 2022
The scheme commenced on
1 July 2016
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You acquired the property in20XX and state that the property was bought with an investment purpose with the view of generating sufficient rental income to at least cover the costs of ownership.
The essential features of the market in which the property is located are:
· The property is located in a holiday area
· The location is only a short drive from XXXXX
· You state being so close to XXXXX holiday lettings are less likely to be full week bookings and are generally weekend bookings
· The nature of the property is a premium property which attracts bookings during peak holiday periods
· At the time of purchase your communication with agents appeared to offer promising returns and attractive services to entice tenants
You engaged an agent for the purposes of managing the property, extending the advertising exposure and with a view to deriving additional rental income.
You were dissatisfied with the level of investment return being derived from the property and conducted a review of the letting strategy which resulted in a change of managing agent.
The review of the letting strategy and the resulting change in management agent has resulted in an increase in the number of days the property has been let as well as an increase in the level of gross income derived by the letting of the property.
You have limited personal use of the property none of which is during peak periods of rental.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Division 43