ATO increases focus on rental property deductions

The ATO will have an increased focus on rental property deductions this tax time.

In particular, the ATO is paying close attention to excessive deductions claimed for holiday homes, husbands and wives splitting rental income and deductions for jointly owned properties that is not supported, claims for repairs and maintenance shortly after the property was purchased, and interest deductions claimed for the private proportion of loans.

There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.

First, it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.

Secondly, rental property owners should only claim deductions for the periods the property is rented out or is genuinely available for rent.

Finally, costs to repair damage, defects or deterioration existing on purchase, or renovation costs, can’t be claimed as an immediate deduction. These costs are deductible over a number of years.

This information is of a general nature and people should contact a tax professional for advice pertaining to their individual circumstances.