Holiday homes and hobby farms could be targeted in the May federal budget, as the Government looks to slug wealthy Australians in order to spend up big on boosting the ailing economy.
It is understood that the Rudd Government is looking at abolishing a loophole that lets people claim holiday homes, hobby farms and other lifestyle assets as tax deductions.
Experts say the group most likely to be affected by this crackdown are those who have a mixed usage of these assets. Grey Hayes, director at accountants Hayes Knight, says a typical scenario is a holiday home owner who rents the holiday home out and claims a $30,000 tax deduction every year.
The owners of those properties that rent them out, for say 30 weeks a year, will likely still be able to claim the same level of tax deductions they currently enjoy. “If this is appropriately done then they would not be affected, unless the legislation is really punitive,” Hayes says.
But the crackdown will affect those holiday home owners who rent infrequently and then use the holiday house throughout the year.
“The group most likely to be affected are those who rent out for say four weeks out of 52 weeks a year,” he says. “They might only be entitled to a $2000 tax deduction instead of a $30,000 tax deduction. The grey area is the time the property is vacant.”
Hayes says this could well lead people to decide they cannot keep the property, and cause a flood of property appearing in an already distressed market.
“The question that remains is what approach the Government will take,” Hayes says. “Will they introduce new legislation or instruct the tax office to interpret existing legislation differently?”
Hayes says a lot of people are renting out properties, only taking a minimal income and making significant tax deductions.
There are reports that this and other measures could save the Government $700 million over four years. Hobby farm deductions can be as much as $50,000 a year.
Hayes says the crackdown could be easily implemented. “The tax office already has all of this data, as it is in tax returns.”
Other crackdowns are also expected to be announced, with the Government expected to tighten up superannuation concessions around transition to retirement.
Treasurer Wayne Swan refused to confirm or deny speculation about the budget, but does confirm it will provide further economic stimulus.
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