The Australian Taxation Office (ATO) reminds property investors to be extra careful when making rental deduction claims.
In the 2017–18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions. Finding out about several dodgy claims, the ATO is now doubling audit numbers on rental deductions.
Assistant Commissioner Gavin Siebert says that this year, the ATO has made rental deductions a top priority. “A random sample of returns with rental deductions found that nine out of 10 contained an error. We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year,” he said.
When it comes to dodgy claims, the ATO’s detection methods are becoming more advanced. The Tax Office now uses a range of third party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinise every tax return. Once a claim of concern is identified, the ATO will investigate and prompt taxpayers to amend unjustifiable claims and if necessary, commence audits.
The specific areas of focus are on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing – ie Airbnb.
If an audit is done, the ATO may search through even more data including utilities, tolls, social media and other online content to determine whether the taxpayer was entitled to the claims made.
While no penalties will apply for taxpayers who amend their returns due to genuine mistakes, deliberate attempts to over-claim can attract penalties of up to 75% of the claim. In 2017–18, the ATO audited over 1,500 taxpayers with rental claims, and applied penalties totalling $1.3 million.
In line with a stricter compliance monitoring of the ATO, property owners should also be aware of how to deal with capital works and repairs, holiday homes, damaged or destroyed properties, as well as the new instant asset write off.
To learn about all this, watch Effective PD’s webinar on Rental Property Deductions and New Instant Asset Right Off. To subscribe, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.
