Property Subject to Mixed Asset Rule
Mixed use Assets are property that has both income earning and private use purposes and remains unused for 62 days or more.
Examples of these include:
- Property of any value
- Aircraft, Ships or Boats with market value of above $50,00 when purchased
- Accessories/items relating to the asset
There are exclusions to the above. These Include:
- A room in your home rented out for short-term stays
- Residential property used for a long-term rental
- Business asset where private use is minor e.g., once a year
GST Application
If you are GST registered, then GST can be claimed on the proportion of the expense that relates to business use. The easiest way to identify and differentiate business and personal use is through the number of days. The number of days the asset was used for business use is divided by the no. of days the asset was actually used (for both business and private purposes). This provides the percentage of expense that can be claimed.
Losses and the Expenditure Quarantine Rules
If the expenditure quarantine rules apply, when deductions exceed the income generated, the excess deductions must be carried to the following year when income is earned from the property. This income cannot be offset against income from other sources such as salary or wages.
The Quarantine rules apply when:
- Income from renting out the dwelling during the year is less than 2% of the property’s value
- A loss has been made from renting the dwelling, so deductible expenses exceed the income earned.
e.g. for a loss making holiday home, only deductions equivalent to the amount of income generated can be claimed. Remaining deductions cannot be claimed against any other income and must be carried onto the following year in which the holiday home generates an income.
Deductibility of Interest
For residential property acquired on or after 27 March 2021, interest is no longer a deductible expense on any property with an existing dwelling. There is exception for new builds as well as land business such as developing land, subdividing or erecting buildings on land. This has been done by the government to create a level playing field between investors and home buyers.
For advice specific to your situation, get in touch with us below.
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