Holiday rentals depreciation is an often missed deduction for investors. We are often surprised by how many investors don’t claim for depreciation of their holiday rental, despite the significant tax advantages that maybe available. Owners of holiday rentals are entitled to claim depreciation on the property and furniture that is within the property for the periods the property is rented or genuinely available for rent. ( https://www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Deductions-for-rental-property-owners/?tpissue-10-2016). Holiday rental owners can get great results by having a tax depreciation schedule. Our clients Erin and Scott claimed over $19,000 in deductions in the first full financial year for their holiday rental. How? Read case study below.
Erin contacted our office and said that she and her husband Scott own a holiday house at Blueys Beach, a beautiful beach location on the East Coast of NSW. Erin and Scott’s holiday house sleeps 10 and has 4 bedrooms, 2 bathrooms, 2 car parks and is fully furnished. Erin was surprised to hear that not only could they claim for capital allowances on their building, but that they could also claim depreciation on their furniture, linen, kitchen crockery etc.
The value of Erin and Scott’s furniture was just over $40,000. In the first full financial year Erin and Scott’s tax deductions for just the furniture came to $9,264. Combined with the capital allowance deductions the claimable tax deductions for Erin and Scott in the first full financial year were $19,864. Because Erin and Scott used the property for 2 weeks in that year they need to adjust their deductions by that amount. They had a personal use component of 3.8% therefore they are entitled to claim $19,109 for that financial year.
Erin and Scott were able to reduce their taxable income by $19,109 and pay substantially less tax by having a tax depreciation schedule. With that result Erin and Scott can go on a longer holiday next year!
If you own an investment property, the best way to ensure your depreciation deductions have been maximised is to use a depreciation schedule prepared by Capital Claims Tax Depreciation. For an estimate of deductions you may be entitled to, or to have your current depreciation schedule reviewed free of charge, please don’t hesitate to get in touch.