Tax Tips for Rental Investors
“Tax office to double audits of dodgy rental deductions” – this is the title of an article recently published on the ATO’s website.
The article mentions that, in random sample of returns containing rental property deductions, 9 out of 10 contained an error.
If you own a rental property, you will need to make sure that what is lodged this year is correct as your tax return may be selected for an audit.
Here are some issues high on the ATO’s list:
• An incorrect loan interest claim. If you use some of the rental property loan funds for personal use then your rental property loan interest is no longer fully deductible. You are not able to claim the private portion of the interest in your tax return and this remains true even if the funds are repaid.
• Claiming asset purchases or improvements as repairs. Genuine repairs are immediately deductible but improvements, renovations or asset replacements are considered capital works and are claimable over a number of years. If you are not sure if the expense is of a repairs or capital nature, contact CrossCorp for assistance.
• Declaring that the property is genuinely available for rent when it is not. If you have a holiday home (or other rental property) and make it available for rent, you will need to make sure that it is genuinely available for rent. This means that the property is available during key holiday periods, advertised for a reasonable market rent and you are not refusing any tenants unreasonably.
• Not taking up private portions of expenses when the property is not available for rent or it is being used personally.
• Not all rental income is being included in the tax return. If you are receiving income for renting out part of your property, (even your home) then this too will need to be reported. The ATO now receives data matching from many different accommodation sharing platforms. The ATO will likely know if you have received an income and will ask why it hasn’t been reported.
Any rental expense claims should be supported by receipts or other supporting documents to substantiate – in an audit, the ATO will ask for these.
The ATO also provides top 10 tips to help rental property owners avoid common tax mistakes.
If you are unsure about your rental deductions and want to make the right claim, contact CrossCorp today and speak to one of our advisors.
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