The Australian Tax Office (ATO) warns it is cracking down on rental home owners who wrongly claim tax deductions on properties they are using for their own personal holidays.

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The ATO's assistant tax commissioner Kath Anderson said too many holiday home owners were claiming deductions for properties which were not genuinely available for rent or were only available to friends and family.

"While private use of a property is entirely legitimate, you can't claim tax deductions for that period," she said.

"What's actually happening here is that the rest of us are effectively subsidising their holidays and their holiday homes."

Ms Anderson said in one case a man who owned a property on Victoria's Mornington Peninsula claimed $760,000 in deductions for a property used by either himself or family and friends for 87 per cent of the year.

"That included it being blocked out for their use in peak periods," she said.

The man declared earning $27,000 income from the property, which Ms Anderson said was not reasonable, given the huge amount he claimed in deductions.

What can property owners claim as deductions?

The general rental market will also be subject to the ATO crackdown. ( Unsplash: Alvin Engler )

The types of deductions property owners can claim include money they spend on repairs and maintenance, cleaning and rates.

Ms Anderson confirmed many rental home owners also negatively geared their properties.

"About 80 per cent of taxpayers with rental properties claim interest on their loan and it makes up nearly half of all rental expenses," she said.

She said the ATO's crackdown extended beyond holiday homes to the general rental market.

Ms Anderson said some taxpayers claimed their property was available for rent, but when the ATO investigated it was clear they have had very little intention of renting it out.

"We're seeing people not bothering to advertise or advertising in an obscure way," she said.

"We see things like unreasonable conditions placed on prospective renters, rental rates set above market rates."

ATO to use data matching to track rorters

The ATO says it will check to see if listings appear genuine. ( Supplied )

The ATO warns it will use new technology and data matching to identify taxpayers who make incorrect or false claims.

"Where something raises a red flag, it will be investigated," she said.

"Property owners whose claims are disproportionate to the income received can expect scrutiny from the ATO."

H&R Block director of tax communications Mark Chapman said the ATO's threat was not empty, and technological advances had made it simple to track people doing the wrong thing.

"If you're saying that your holiday rental was available for rent, the ATO can google that or they can look on one of the commercial websites," Mr Chapman said. "And if the property isn't there, or … there are lots of dates blocked out … that immediately throws into question your claims."

"There are over two million Australians who have rental properties of one sort or another and what the tax office has been telling us for sometime is that they see a pattern of people claiming deductions that they're not entitled to."

He said any reputable tax adviser would not allow their clients to make such claims.

Ms Anderson said the penalties for incorrect claims varied but the maximum was 75 per cent of the shortfall between what was paid and what was actually owed.