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A new Tax Office ruling clarifying the criteria for deductions on income earned through specific lease arrangements may limit property investors who incorrectly claim losses on their properties.
The ruling, issued mid-September, sets out parameters for claiming losses on properties that are let at arm’s length or to relatives, or on properties that are used as holiday homes part of the year.
As part of the ruling, holiday homeowners cannot, for instance, treat small payments from friends or relatives who use the home as assessable income. Any income received from the commercial letting of the home, however, can still be claimed.
The Tax Office ruling lists seven sections – which represent seven rental situations – in which questions commonly arise about “the extent to which losses and outgoings in connection with rent producing properties are allowable as income tax deductions.” These situations are as follows: