If you are one of the many Australian’s who own rental properties or rent out holiday homes for a few weeks a year, then make sure you are correctly claiming for your tax deductions.
The ATO is stepping up its focus on rental property owners, in particular holiday home owners reminding people to only claim the deductions including maintenance and mortgage interest they are entitled to; for the periods the holiday home was rented out or was genuinely available for rent.
A key concern in regard to holiday home owners, is when people make claims for expenses when the property was not genuinely available for rent.
Where relevant, it may be prudent for holiday home investors to take this opportunity to review the rules surrounding holiday home tax deductions to ensure that any risks or issues are addressed in a timely manner. It may also be a good idea to review records now so that you are prepared should the taxman come knocking.
But it’s not just holiday homes that are under the microscope. Many rental property owners are also incorrectly claiming deductions as well. In particular, a common mistake for rental property owners was claiming deductions for initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property.
An ATO spokesperson says, “it’s important for taxpayers to understand they are not entitled to claim a deduction for repairs to their rental property for issues that existed when they purchased it, even if they carried out these repairs to make the property suitable for rent. The cost of these repairs is instead used to work out any profit, or capital gain, when the property is sold.”
If you would like more information on this please contact Paul Hodge, Morrows’ Specialist Taxation Advisor.