This is an area investors should be aware of if their property is not used as a long-term residential tenancy, or where in any given year the property is used as both a residential tenancy and a short-term holiday rental, e. g. Airbnb.

Mixed-use asset rules apply to a property which is used for both private( by you, your family or associated people) and income-earning use in the same tax year. It must also be unused for 62 days of that year. These rules specifically exclude residential property used as a long-term rental.

You can opt out of these rules if your property earned less than $ 4,000 in that tax year, however, you won’ t be able to claim any expenses against this property if you choose this route.

There are three types of expenses associated with a mixed-use property:

• You can claim 100 % of expenses related to renting out your property. An example of this type of expense would be advertising the property for rent, or repairs to damage by tenants.

• You can’ t claim any expenses that relate to the private use of your property. e. g. boats or equipment that are locked away when renting the property out.

• Finally, expenses that can’ t be deemed private or related to renting out the property need to be apportioned. Generally this would include any interest on loans secured against the property, rates and insurance etc.

The easiest way to describe this is with the following example:

Paul owns a mixed-use property in Waihi. He used it privately for 32 days, as well as renting it out for 45 days. The expenses that can be apportioned totalled $ 11,500.

Paul can claim $ 6,721 of these expenses against his rental:

There are more complicated rules at play around quarantining losses and what to claim if your property was sold during the tax year.

If this raises any questions for you around the use of your own investment property, we recommend you seek the advice of a chartered accountant.

INVESTMENT INFORMATION GUIDE 21