The applicant owned a rental property in Sydney for which he claimed rental deductions totalling over $400,000 between 2001–2003. All of these deductions were offset against total gross rent of $14,700.

The deductions were claimed on the basis that the property was available for rent during the entire period, however the property was only rented for 30 days each year in the 2001 and 2002 years, and for 8 out of 91 days in 2003.

The Commissioner argued that as the property was only rented for 8.2% of the 2001 and 2002 years, and 8.8% of 2003, the taxpayer was only entitled a deduction based on the proportion.

The AAT agreed with the Commissioner’s assessment, and held that the expenses incurred by the applicant should be apportioned.

Warning: Where a taxpayer has a rental property as an investment, they must be able to demonstrate that the property has been available for rent for the whole of the income year. If the taxpayer cannot demonstrate this, it is likely that the rental deductions will be apportioned on a use basis or worse no deduction at all.