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Work out what tax there is to pay when you rent out, and use, a holiday home

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).

Mixed-use asset rules

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.

Actual costs method for working out rental income and expenses

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-stay accommodation is a taxable activity for GST.

You'll only have to register and file if your turnover from all your taxable activities is over $60,000 for the year. This includes your short stay rental income.

Make sure you read about GST to find out what your obligations are.

GST and renting out residential property

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Last updated: 22 Mar 2024
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