Even as Australia faces a historic shortage of rental properties, the Australian Taxation Office (ATO) has warned real estate investors their tax returns will be scrutinised closely.
The ATO claims nine out of 10 landlords make mistakes in their tax returns, so they’ll receive special attention this year.
As an experienced real estate agency with a strong property management practice, we strongly recommend our clients work with professional financial advisers to ensure their tax returns are justified and within the rules.
For example, it’s essential to understand the difference between repairs (deductible immediately) and capital improvements (deductible over time). If you’re ever in doubt, consult a tax professional.
An incorrect tax return can result in an audit, penalties and interest charges.
We understand the ATO will focus on inflated deductions first and foremost.
ATO Assistant Commissioner Rob Thomson confirmed expenses relating to rental properties would be scrutinised. “We often see landlords making mistakes when it comes to repairs and maintenance deductions,” he said. “We’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit.”
In another property-related warning, the ATO has red-flagged its intention to look closely at work-from-home expenses. Last year, some 4 million Australians claimed a deduction related to working from home. If you’re considering making such claims, ensure you have detailed records.
By being diligent and seeking professional guidance, you’ll avoid unwanted attention from the taxman.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.