When renting out a holiday home you must pay tax on the income.
To work out what tax you'll pay, take away your allowable rental expenses from your gross rental income. The method you use to calculate these depends on:
- any private use of the holiday home by you
- the number of days your holiday home was unused.
When the mixed-use asset rules apply
You must use the mixed-use asset rules if your holiday home was both:
- used to earn rental income and was also used by you or an associated person (this is the mixed-use)
- was unused for 62 days or more (being available for use does not count).
When the mixed-use asset rules do not apply
You must use the actual cost method to work out what tax there is to pay on rental income from your holiday home if either of the following apply:
- the home earned you rental income and was not used by you or an associated person
- the home was unused for less than 62 days.
How you use the actual cost method
How you use the actual cost method depends on your use of the holiday home. If you rented it out and:
- you did not use it privately, deduct all rental expenses from the rental income. You can do this for the time you rented it out and when it was available to rent.
- you or an associated person used it privately, you need to work out what the expenses are from the days it was rented out and available to rent.
To claim expenses for the time it was available to rent, you must be able to provide evidence that you did not use the holiday home privately during this time. You can only deduct these expenses to see what you'll pay tax on, not those for private use. The actual cost method shows you how to do this.
You cannot use the actual cost method if your holiday home is unused for 62 days or more. You must use the mixed-use asset rules.
GST when you’re renting out your holiday home
Residential rental income from renting out long-term is exempt from GST. You do not register, file or claim GST for your rental income and expenses. Renting out short-term is a taxable activity for GST.
If you’re not already registered for GST, you need to:
- add your short-term rental income to income from your other taxable activities
- register for GST if your total turnover is over $60,000 in a 12-month period.
If you’re renting out short-term and you're registered for GST you:
- pay GST on your short-term rental income
- claim GST on your allowable rental expenses.
What did you like about this page?
Please tell us how we could improve this page?
Thanks for sharing your opinion! Your feedback has been received.
Sorry there was an issue submitting your feedback, please try again later.