Mixed-use assets are property (for example holiday homes), aircraft and boats with both private and income-earning use. You need to work out the amount of private and income-earning use for each asset, as this decides how much income you declare and what expenses you can claim.
You have a mixed-use asset if during the tax year the asset is:
- used for both private use and income-earning use
- unused for 62 days or more.
The rules apply to any:
- property, regardless of cost price or current value
- aircraft, ship, boat or craft used for navigation on or under the water which had a cost or market value of $50,000 or more when you bought it
- additional item or accessory relating to the asset, for example a quad bike stored at a holiday home.
The rules do not apply to a:
- residential property used for long-term rental
- business asset where the private use is minor, for example once a year
- home office where your expense claim is based on floor area
- room in your home rented out for short-term stays.
These are known as excluded assets.
Mixed-use assets and GST
The mixed-use asset rules also apply to GST.
If you're GST-registered, you can claim GST on the percentage of expenses that relate to the asset's business use.
Learn more about the GST rules on mixed-use assets in the Tax Information Bulletin.
Opting out of the mixed-use asset rules
If you meet certain criteria for the income year, you can choose to leave out income and expenses relating to your asset from your income tax and GST returns. You can opt out if one of the following apply:
- your gross income for the tax year from the income-earning use of the asset is less than $4,000
- your asset is loss-making and your gross income from income-earning use is less than 2% of the value of the asset (see below for how to calculate this value).
The above exemptions do not apply to holiday homes owned by companies.
Loss-making holiday homes
If your deductible expenditure under the mixed-use asset rules for your holiday home is more than the income from it, you may not be able to claim the whole deduction in that year.
This will be the case if your income from income-earning use of the holiday home is less than 2% of the holiday home’s value (see below for how to calculate this value).
In that situation, you can only claim a deduction equal to the amount of the income from income-earning use of the property. You’ll have to carry forward the excess deductions to a future income year when you earn income from the holiday home.
You can use the carried forward excess deductions in a future year if the income from income-earning use of the holiday home in that year is more than that year’s deductions under the mixed-use asset rules. The maximum amount you can claim from the excess is the difference between that year’s income from income-earning use of the holiday home and that year’s allowable deductions under the mixed-use asset rules for the holiday home. Any remaining excess continues to be carried forward to future years.
Calculating the value for your mixed-use asset
For property (for example holiday homes), calculate the value by using whichever is most recent:
- the local authority capital or annual value (rateable value)
- the purchase price.
If you bought the property from an associated person, use the market value at purchase if the purchase is more recent than the local authority valuation.
For aircraft, ships, boats and other craft used for navigation on or under the water, use the adjusted tax value for depreciation purposes.