The Australian Taxation Office (ATO) is warning homeowners their tax returns will be under the microscope this year. They are told that “doubling down” on expenses and making other incorrect statements could get them into trouble.
Deputy Commissioner Rob Thomson said the vast majority of rental property owners (9 in 10) were making errors on their tax returns. This is despite the fact that most of them use a registered tax agent.
Thomson said he is seeing homeowners make “dubious deductions,” including errors when it comes to repairs and maintenance deductions.
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“It is normal for landlords to have to repair or replace damaged items in a rental property. But there is a certain myth that all expenses can be claimed straight away,” Thomson said.
“A repair can usually be claimed straight away, but capital items such as a dishwasher, curtains or heaters can only be claimed straight away if they cost $300 or less; otherwise, they must be reclaimed over time.”
Homeowners are also making big mistakes when it comes to “double spending” on the same expense that property managers have already pointed out.
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Claiming excessive interest deductions on mortgages is another common mistake, particularly when homeowners redraw or refinance their loans and use some of them for personal purposes.
“Nor is it simply a matter of repaying the private part of the loan and then claiming all the interest as deductible. Payments must be prorated between the private and investment components over the life of the loan,” Thomson explained.
Owners are encouraged to carefully review their records prior to accommodation and ensure they have appropriate documentation, including receipts, invoices and bank statements, to support their claims.
ATO reveals target list
Landlords are one of three key focuses on the ATO’s target list this year. The other focuses are work expenses and people who do not include all their income in accommodation.
Australians are warned not to “copy and paste” their work-from-home claims from last year and to ensure they have records to prove their claims.
The ATO has also told people not to rush to file their tax return on July 1. The ATO will usually pre-populate information for employers, banks, government agencies and health funds at the end of July, so it is recommended to wait until then lodged.
You can check if your income return is marked “tax ready” and if your pre-populated information is available in myTax before you file.
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