The Australian Tax Office is targeting the 1.8 million people – or about 8% of the population – who own an investment property in 2015.
With interest rates at a record low, evidence suggests that the current boom in property investment isn’t about to end any time soon. This boom in investment property ownership throws up particular challenges for the ATO, both in making sure that they know exactly who owns what and also in making sure that taxpayers aren’t rorting the system.
Mark Chapman, Director of Tax Communications, commented “whether it’s a commercial property, a city pad rented out long term or a holiday retreat for family, friends and holiday-makers, the ATO has signalled a big push to check that people aren’t over-claiming tax deductions”.
At the forefront of the campaign, The ATO has recently stated that it will be writing to property investors this year who own 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”, 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, their family and friends, often rent-free”.
Also, 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”, Chapman added, “including access to popular holiday rental listing sites, so it is relatively easy for them to establish whether a claim that a property was “available for rent” is correct”.
Source: H&R BLOCK TAX ACCOUNTANTS
