Want To Use Your Investment Apartment Yourself? Here’s What Owners Need To Know

For many property owners, having an investment apartment that generates income throughout the year while still being available for occasional personal use can offer the best of both worlds.

But if you plan to use your investment property yourself, it is important to understand how this can affect rental property deductions and why genuinely operating the property as an income-producing investment matters.

Recent Australian Taxation Office guidance has highlighted its focus on properties that are claimed as rental investments but may, in practice, be substantially reserved for private use.

Personal use doesn't necessarily stop your property being an investment

An owner can rent their property commercially for most of the year and still reserve periods for their own use.

The important distinction is between the periods when the property is being used privately and the periods when it is rented or genuinely available for rent.

For example, the ATO provides an example of owners who use their holiday property themselves for four weeks of the year while making it available for rent for the remaining 48 weeks.

The owners cannot claim rental deductions relating to their four weeks of private use, but they can generally claim the appropriate rental deductions relating to the remaining period in which the property is rented or genuinely available for rent.

This means occasional personal use does not necessarily prevent a property from continuing to operate as an investment. Owners simply need to understand that expenses may need to be apportioned for their periods of private use.

The key question: is your property genuinely available for rent?

This is where professional property management becomes particularly important.

The ATO considers whether a property is genuinely available to prospective tenants, including whether it is appropriately advertised and whether the conditions attached to renting it make it reasonably likely that tenants will actually book the property.

Restrictions that significantly reduce the likelihood of securing tenants can create problems.

For example, setting an unrealistic rental rate, refusing reasonable bookings or imposing a combination of restrictive conditions could indicate that the property is not genuinely being offered to the rental market.

Simply listing a property does not necessarily establish that it is genuinely available for rent.

How the Corporate Keys model can help

Corporate Keys manages furnished apartments specifically for the corporate, relocation and extended-stay accommodation market.

Our core market is stays of 28 nights or longer, with many guests staying for several months. We professionally market and manage the property, establish appropriate rental pricing and actively seek corporate and extended-stay bookings.

For owners who also want to use their apartment, this can provide a practical balance.

Rather than keeping an apartment predominantly for private use and occasionally attempting to rent it, an owner can have the property professionally managed as an income-producing furnished apartment while nominating periods when they would like to use it themselves.

During the periods allocated for rental use, Corporate Keys can continue to actively market the apartment and seek suitable bookings.

Planning your own stays

If you intend to use your apartment yourself, forward planning is particularly important.

Once an apartment has been committed to a guest, particularly for a multi-month corporate stay, that booking needs to be honoured.

Where possible, owners should therefore advise Corporate Keys well in advance of dates they would like to reserve for personal use.

This allows us to manage availability around those dates while continuing to maximise the property's earning potential during the remainder of the year.

Owners should also remember that periods reserved for themselves, their family or friends may be considered private-use periods for taxation purposes, even if the apartment ultimately sits vacant during some of those dates.

Market pricing matters

Another area highlighted by the ATO is whether a property is genuinely being offered at a commercial rental rate.

An owner cannot simply advertise a property at an unrealistic price with little prospect of securing a booking and assume that it is genuinely available for rent.

Professional management can help demonstrate a commercial approach to the investment.

Corporate Keys continually manages rates according to factors including the apartment, location, length of stay, market conditions, seasonality and current demand.

Our objective is to balance rental return with occupancy rather than simply advertising the property at a rate that may leave it vacant.

What if family or friends stay?

Owners should be particularly careful when allowing family members or friends to use an investment property for free or substantially below market rates.

The ATO treats private use and below-market arrangements differently from normal commercial rental activity. Deductions may need to be reduced or, in some circumstances, limited to the amount of rental income received.

Owners should keep clear records of any periods during which they, their family or friends occupy the apartment.

Good records are essential

If your property combines investment and personal use, keeping accurate records becomes particularly important.

You should maintain records showing when the property was rented, when it was genuinely available for rent, when it was reserved for personal use and when it was actually occupied privately.

Having a professional property manager can also provide an independent record of advertising, booking activity, rental income and periods of availability.

Investment income with the flexibility to enjoy your property

Owning a furnished investment apartment doesn't necessarily mean giving up the ability to enjoy it yourself.

With appropriate planning, owners can retain periods for personal use while having Corporate Keys professionally market and manage the apartment throughout the remainder of the year.

The important point is that an investment property should genuinely operate as an investment during the periods for which rental deductions are being claimed.

For owners who want both rental income and flexibility, the Corporate Keys management model can provide a structured way to achieve that balance.

This information is general in nature and does not constitute taxation or financial advice. The tax treatment of a property will depend on an owner's individual circumstances. Owners should obtain advice from their accountant or registered tax adviser regarding deductions, private use and the tax treatment of their property