Expenses may be deductible for periods when the property is not rented out, providing the property is genuinely available for rent – that is:
• The property is advertised, giving it broad exposure to potential tenants
• Considering all the circumstances, tenants are reasonably likely to rent the property.
The absence of these factors generally indicates the owner doesn’t have a genuine intention to make income from the property. Factors that may indicate a property is not genuinely available for rent include:
• it is advertised in ways that limit its exposure to potential tenants – for example, the property is only advertised:
o at your workplace
o by word of mouth outside annual holiday periods when the likelihood of it being rented out is very low
• the location, condition of the property, or accessibility of the property, mean it is unlikely tenants will seek to rent it
• you place unreasonable or stringent conditions on renting out the property that restrict the likelihood of the property being rented out, such as:
o setting the rent above the rate of comparable properties in the area
o Placing a combination of restrictions on renting out the property – such as requiring prospective tenants to provide references for short holiday stays and having conditions like “no children” and “no pets”.
• you refuse to rent out the property to interested people without adequate reasons.
Note – Properties that privately rented out by landlords may face difficulties in proving their property was genuinely available for rent since they are not advertising their property through a real estate agent.
However, it may not always be the case if landlord can demonstrate their genuine intent to rent by showing enough evidence that proves they have advertised their property on enough channels to solicit tenancy inquiries.
Contact Expert Tax on 1300 8 MY TAX (1300 869 829) or 0449 952 855 for further assistance on rental property related tax queries.
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