The ATO has sent a warning to property investors after it found rental income and deduction errors in more than 70 per cent of tax returns audited last year.

It has found that investors have been failing to declare all rental income or any capital gains from selling an investment property as well as incorrectly claiming deductions on their rental properties.

The ATO now has better oversight through third-party data sources such as sharing economy platforms, rental bond authorities and property managers.

Some of the more common mistakes are:

  • Incorrect interest claims for the entire investment loan where it has been refinanced for private purposes
  • Incorrect classification of capital works as repairs and maintenance
  • Apportioning deductions for holiday homes when they are not genuinely available for rent.
  • Partners splitting income and deductions
  • Incorrectly claiming capital works, such as immediately claiming the full amount for a kitchen renovation, instead of spreading it over a number of years
  • Claiming deductions on redrawn mortgage loans used for personal expenses

In particular, platforms such as AirBnb and Stayz are being closely looked as they have now become very popular. The ATO has access to third party data so they can check if a property was actually available or not.

You may not even be aware that you are making a mistake in your claim, which is why it is very important you contact us for a tax health check.

There are significant penalties for non-compliance and the audits may ask for back dated information, so it is vital that you correct any mistakes.

You can only claim deductions for when the property was rented or available for rent. Always keep your invoices, receipts and bank statement as well as any adverts when the property was available – online ads/ listings/ local newspapers.

If you have any questions about what you can and can’t claim, please do not hesitate to contact the Taxpro team who can help guide you through. Please call us on 08 9240 7629 or email here to book an appointment.

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If you have any queries, please do not hesitate to contact us on 08 9240 7629 or email: admin@taxproaustralia.com.au

 

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