If you own an investment property, you’re going to want to listen very closely because this article applies directly to you!
Due to recent events, the ATO has given firm warnings urging owners to ensure their claims are correct this tax time. With more than 2.1 million people (8% of the Australian population) owning an investment property, the ATO has made rental deductions their top priority. Why? Because last financial year more than 2.2 million Australians claimed over $47 billion in deductions with 9 out of 10 returns containing an error.
Detection methods are becoming more advanced and the ATO staff have been tasked with investigating claims of concerns before prompting taxpayers to amend unjustifiable claims.
What does this mean for you? Well you can expect to see more in-depth audits, with predictions that these will increase to 4,500 this year. Any deliberate attempts to over-claim attracting penalties of up to 75% of the claim.
So, what can you claim and what can’t you claim?
You can claim:
- Management and maintenance costs such as interest on loans.
- Borrowing expenses, depreciation and capital works spending – can be deducted over a number of years.
You can’t claim:
- Expenses not paid by you such as water or electricity charges paid by your tenants.
- Acquisition & disposal costs including purchase costs, conveyancing and advertising costs and stamp duty on the title transfer.
- GST credits for anything you purchase to lease the premises.
Still unsure? We recommend you speak to your trusted tax accountant about these changes to ensure you stay ahead of the curve and avoid costly fines.