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Australia clamps down on yachties

CANBERRA, Australia (CNN) -- The Australian government has warned boat owners who lease their vessels to charter companies not to falsely claim expenses as tax deductions.

The Tax Office was preparing a draft ruling and urged caution from boat owners when submitting applications for income tax deductions.

Tax Commissioner Michael Carmody said the office had reviewed a boat charter arrangement where a yacht was acquired and leased to a boat-chartering company.

"In the particular arrangement large losses from the activity were being written off against other income of the boat owners."

Carmody highlighted a tax clause designed to "deny deductions for expenditure relating to boats, ski-lodges, holiday cottages and facilities of similar kinds unless a genuine and substantial business need for the facility is established."

"We find it difficult to see that a person owning one yacht and simply leasing it to a charter company could be said to be carrying on a business," he said on the office's website.

However, he said that each arrangement would be examined on its facts and it may be possible in particular circumstances to conclude that a business is being carried out by the owner.