The government are changing the tax rules around private use of assets such as holiday homes, boats, aircraft and so on (not road vehicles though). The idea is to prevent people having assets setup as businesses but not sufficiently hiring them out yet still claiming expenses to reduce tax. For all people who own such assets and also use them privately either personally or for friends and family they will need to start keeping clear records of the mixed use for annual accounting.

We're still being brought up to speed on these changes and will advise accordingly in coming updates. In the meantime we recommend following IRD's advice with keeping records of usage...

New rules are expected to come into effect from the 2013-14 income year to change the amount of deductions claimed on a holiday home that is used both privately and for business.

Along with the normal records required for income and expenses, the following should now also be kept by you in expectation of this change:

• How the home is used for each day of the year.
• Details of who used the home, including:
  • the number of days in use
  • the person's relationship to you (eg, son, friend)
  • the rent charged to each person.
• Details of any repairs carried out, including the reason for repairs.

These rules will take effect from 1 April 2013 so records need to be kept from this date going forward. We realise this requires quite some additional record keeping but will be needed for accurate claims. There's little doubt IRD will be looking specifically for these records in audits (which do seem to be on the increase). These new rules are complex and the additional required work at accounting and tax time will be non-trivial. As always please ask us if you have any questions and we'll keep you updated as more information comes to hand.

Posted 15/07/2013

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