Boat owners warned to look out for tax traps

Sea-lovers seeking to make some money by renting out their boats may no longer be able to claim their vessel as a tax deduction.

Sea-lovers seeking to make some money by renting out their boats may no longer be able to claim their vessel as a tax deduction.

Many boat owners looking to pay off and maintain their vehicles hire them out, but in order to claim deductions owners must maintain a set of criteria cleared by the tax office.

Tina Louras from accounting group PKF warns boat owners have to be specific in how they rent out their boats.

“If a boat owner is only hiring out their boat for a couple of weeks a year to help cover the costs of their own private use of the boat, then the likelihood of profit is nil and the ATO will not consider this activity as a business. Even larger scale chartering activities might not meet the criteria of a business if the activity is sporadic and doesn’t show a possibility for financial gain,” Louras says.

“It’s also important to note that the ATO will not grant tax concessions for boat owners receiving a passive income from their charter activities.”

Louras points out the following to consider when hiring out a boat for tax concessions:

• Significant commercial purpose or character.
• Prospect of profit.
• Activities carried on in a similar manner to those of ordinary trade.
• Organised, systematic, business-like manner.
• Repetition and regularity in conduct.
• The size and scale of the activity.

See also Boat owners the latest target for the taxman