The Law has now been passed for changes to expense claims on assets which are used privately but are also used to earn income (mixed use assets) for example holiday baches, planes and boats.
The old rules allowed a ratio between business and private use which included any periods the asset was available but not used. The new Law has put restrictions on deductibility for expenses during the available/not used period and came into force on 1st April 2013.
If you have been claiming deductible expenses on any of the above mentioned assets (or any others you own) please contact us to discuss the current law. These new rules will be strongly enforced as the government is anticipating a $50m income from them.
Exemptions are available within this new law. If you receive no more than $4000 a year from renting your asset (and are charging at least 80% of the market value) the income can be tax free but no expenses can be claimed. Similarly if you are not charging 80% or more of market value – such as renting to family members – then again tax is not payable nor is this income a component of the $4000 above. Business owned mixed assets do not qualify for this exemption.
Additional Records Required
You will be required to keep the following records for this new Law:
Total number of days (365) broken down into, as an example:
|Boat – days rented||40|
|– not being used||280|
|– private use||45|
Name of user and relationship if any e.g. Janet Jones (sister).
Amount of income from each user.
Details of relationship if reduced rate has been charged.
Full details of maintenance and repair expenses.