The Australian Taxation Office is to increase its scrutiny of the 1.8 million investment property owners this year.
Mark Chapman, director of tax communications at H&R Block said the property boom is throwing up challenges for the Tax Office who, which is determined to ensure taxpayers aren’t 'rorting the system'.
“Whether it’s a commercial property, a city pad rented out long-term or a holiday retreat for family, friends and holiday markets, the ATO has signalled a big push to check that people aren’t over-claiming deductions,” Mr Chapman said.
As part of this campaign, the ATO has recently stated it will write to investors with properties in popular holiday areas to remind them to claim only the deductions to which they are entitled.
“Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent,” Mr Chapman said. “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 or their family and friends, often rent-free.”
Mr Chapman also reminded investors that the costs associated with repairing damage and defects present at the time of purchase – and the costs of renovations – cannot be claimed immediately.
These costs are instead deductible over several years, he said, and the ATO will push back against claims that 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, so it is relatively easy for it to establish whether a claim that a property was ‘available for rent’ is correct,” Mr Chapman said.