Social media and the press were awash last week with the warning that the Australian Tax Office (ATO) audits on property investors are going to double. The ATO is set to crackdown on property investors incorrectly claiming deductions on their rental properties.

The ATO has run audits from a random sample of returns with rental deductions and found that nine out of 10 contained an error.

Some of the more common mistakes have been identified as:

  • 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

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.

Download our property investors checklist here

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 admin@taxproaustralia.com.au to book an appointment.

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