The ATO believes errors in rental property claims is the second biggest component in the $8.7 billion tax gap (after work-related expenses) and indeed they recently announced that in a series of audits, the ATO found errors in 90% of returns reviewed.
So, this year, expect them to focus on the following:
ATO has announced it will be paying close attention to excessive interest
expense claims, such as where property owners have tried to claim
borrowing costs on the family home as well as their rental property.
will also be looking at the incorrect apportionment of rental income and
expenses between owners, such as where deductions on a jointly owned property
are claimed by the owner with the higher taxable income, rather than
will be looking at holiday homes that are not genuinely available for
rent. Rental property owners should only claim for the periods the
property is rented out or is genuinely available for rent. Periods of
personal use can’t be claimed. This is particularly important for holiday
homes, where the ATO regularly finds evidence of home-owners claiming
deductions for their holiday pad on the grounds that it is being rented
out, when in reality the only people using it are the owners, their family
and friends, often rent-free.
will be keeping a close eye on incorrect claims for newly purchased rental
properties. The costs to repair damage and defects existing at the time of
purchase or the costs of renovation cannot be claimed immediately. These
costs are deductible instead over a number of years. Expect to see the ATO
checking such claims and pushing back against claims which don’t stack up.
forget, the ATO has access to numerous sources of third party data including
access to popular holiday rental listing sites such as Stayz and Airbnb, so it
is relatively easy for them to establish whether a claim that a property was
"available for rent” is correct.
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Saturday, 22 June 2019