Mixed-Use Asset

Mixed-use asset (MUA) rules — Income Tax Act 2007 sections DG 1 to DG 22 — apply to an asset (typically a bach/holiday home, boat, or plane) that is used BOTH for income-earning purposes (rented out at market rates to unrelated people) AND for private use (by you, family, friends, or rented below market rate), and that sits unused for at least 62 days in the year. If the asset is vacant fewer than 62 days, the MUA rules don't apply and ordinary rental-property rules apply instead.

Where the rules apply, expenses are apportioned by the ratio of income-earning days to total used days (income-earning days plus private-use days — vacant days are excluded from the apportionment). A loss-quarantine rule then kicks in if gross income from the asset is less than 2% of its market value for the year: any resulting loss is quarantined and carried forward against future income from the SAME asset, rather than being deductible against other income immediately.

An opt-out election (s DG 21) is available if gross income from the asset is $4,000 or less for the year — electing out makes the asset effectively invisible for tax purposes (no income to declare, but also no deductions to claim).