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.
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.