Recently, the ATO released a statement declaring it will have an increased focus on rental property deductions and has encouraged owners to double-check their claims are correct before lodging their tax return.
Mark Chapman, H&R Block’s director of tax communications, said it is important these taxpayers and their advisers are particularly vigilant this tax season.
“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,” Mr Chapman said.
“Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent.”
Mr Chapman reminded practitioners that claims cannot be made for periods of personal use.
“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,” he said.
H&R Block also said the costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately.
These costs, according to the tax network, are deductible instead over a number of years.
H&R Block warned investment property owners and their advisers to expect to see the ATO checking such claims and pushing back against claims that do not 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 them to establish whether a claim that a property was ‘available for rent’ is correct,” Mr Chapman said.