Rental Property Owners warned over rental deductions

4th June 2019

The Australian Tax Office (ATO) has announced that it will double the number of audits for rental deductions. In the 2017–18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and rental property owners are being warned to ensure their claims are correct this time.

Gavin Siebert, Assistant Commissioner has confirmed 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.

“We expect to more than double the number of in-depth audits we conduct this year to 4,500, with a specific focus 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,” Mr Siebert said.

In 2017–18, the ATO audited over 1,500 taxpayers with rental claims, and applied penalties totalling $1.3 million. No penalties will apply for taxpayers who amend their returns due to genuine mistakes, however deliberate attempts to over-claim can attract penalties of up to 75% of the claim.

“This tax time, our message to taxpayers is clear. If you are renting out a room or a property, any money you earn must be declared as income and any deductions you claim may need to be apportioned for private use,” Mr Siebert said.

Key issues the ATO will be checking:

  • Is loan interest being claimed correctly?
  • Do you know the difference between capital works and repairs?
  • Do you have a holiday home or a rental investment property?
  • Have you kept all relevant records?

For further guidance on this checklist please visit the ATO website here.

Call in at your local TaxAssist Accountants for help.