Holiday spot's short-term rental

Question from David updated on 6th January 2014:

Hi, we live in a popular tourist spot and are looking at renting out our house for just three to four weeks over Christmas and New Year. Are we liable for tax on this as the house is fully occupied by us for the rest of the year and doesn’t seem to fall under the Inland Revenue Department rule where a property is empty for more than 62 days a year? Thanks

Our expert Mark Withers responded:

The 62 day rule you refer to is in the new mixed-use asset rules that now restrict the deductions against income from rented holiday homes. However, there is an exclusion from these rules for property that is occupied for a period by the owner and for a period where the property is exclusively rented. This would seem to cover your circumstances. This would also be similar to situations like the Rugby World Cup where owners vacated properties to derive rental for a period then moved back into the properties. In these circumstances the income derived is taxable and must be declared however legitimate rental expenses like interest, rates and insurance could be deducted by apportionment for the period that the property is rented.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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