The ATO Property spotlight

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:


  • The 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.
  • They 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 jointly.
  • They 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.
  • They 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.

Don’t 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.

Source: https://www.lifehacker.com.au/2019/06/the-australian-tax-office-hotspots-2019-do-they-apply-to-you/

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Jason Gwerder
Saturday, 22 June 2019

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