If you rent out your holiday home, the rental income you receive must be included in your tax return. However, the good news is that you can claim deductions for expenses incurred in earning that rental income.
When do you need to apportion expenses?
Apportionment becomes necessary in several situations:
- Your property is only genuinely available for rent during part of the year
- You use the property for personal purposes during part of the year
- Only a portion of your property generates rental income
- You charge family or friends below-market rent to use the property
Apportionment ensures you only claim deductions that directly relate to the income-producing period or portion of your property.
Expenses that don't require apportionment
Some expenses relate solely to the rental activity and are fully deductible without apportionment. These include:
- Real estate commissions
- Advertising costs to find tenants
- Tradesperson calls to repair tenant-caused damage
- Costs of removing rubbish left by tenants
Because these expenses exist only because you're renting the property, you can claim them in full.
Expenses you cannot claim
Conversely, you cannot claim deductions for expenses that relate to:
- Periods when the property is not genuinely available for rent
- Times when you, your family, or friends use the property privately
- The portion of the property that isn't rented out
This includes cleaning costs after personal use, repairs for damage you caused while staying there, and any other expenses tied to private enjoyment rather than rental income generation.
Understanding which expenses qualify and how to apportion them correctly is essential for maximising your deductions while staying compliant with tax requirements.
