Types of mixed-use expenses
Fully deductible expenses
You can claim deductions and GST for 100% of any expense that relates only to the asset's income-earning use. For example, the cost of advertising for guests for your holiday home, or the cost of repairs when your boat was damaged during a charter trip.
You cannot claim any expenses or GST that relate to the asset's private use. For example, the cost of a quad bike stored in a locked garage and unavailable to the people renting your holiday home.
Apportioning (splitting ) expenses
If an expense relates to both income-earning use and private use, you need to apportion the expense. For example rates, insurance, internet and power.
Deductible interest for residential property
Interest is not deductible from 1 October 2021 under the interest limitation rules unless an exclusion or exemption applies or it is partially deductible during the phase-out period. If interest is deductible, you will need to apportion it between both income-earning use and private use.
Private use of an asset
Private use of your mixed-use asset means use by:
- you, your family or associated persons, regardless of whether they pay you
- non-associated persons if they pay you less than 80% of market rates for the use of the asset.
Any payment you get for private use is counted as exempt income and does not need to be declared in your tax return. You cannot claim expenses relating to private use.
Income-earning use means use by a non-associated person who pays you 80% or more of market rates for the use of the asset.
Income-earning days include any days you spend either occupying or using the asset to:
- fix any damage to the asset, as long as the damage happened on an income-earning day
- relocate the asset, as long as you're paid to do so.
For GST, income-earning days includes all days that you get any money or other reward, no matter the percentage of market rate paid.