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Rental property owners are in the spotlight

As we dive into tax season, it's important to be mindful of what the ATO is focusing on, especially regarding investment properties.


The ATO is warning rental property owners that their tax returns will be a focus area this tax season. According to the ATO, the "majority" of rental property owners are making errors in their tax returns despite 86% using a registered tax agent.


We understand the significance of these points and how they impact your tax return preparation; join me as I share the common mistakes and what the ATO is keeping a watchful eye on:

  • repairs and maintenance versus capital expenditure

  • over-claimed deductions and lacking documentation to substantiate

  • interest deductions include redrawing or refinance used for private expenses

  • State or territory stamp duty is being claimed as a deduction.


First off, let's talk repairs and maintenance. The ATO is delving deeper into what constitutes a genuine repair versus a capital item. It's crucial to distinguish between the two, as it directly affects your current year's return. We always aim to maximize your benefits by claiming expenses in the current year wherever possible and genuine.


Next, over-claimed deductions and lacking documentation are under the ATO's radar. They're emphasizing the need for proper substantiation and documentation. Keeping receipts and maintaining solid records is key to safeguarding your deductions in case of review or audit.


Moving on to interest deduction, it's essential to be meticulous about mortgage offsets, redraws, and refinancing. Properly apportioning interest against the acquisition of new properties is crucial to avoid potential discrepancies.


We also want to address some common misconceptions, such as the stamp duty on purchase. It's important to note that this is a capital item, not a tax deduction that can be claimed against rental income.


Lastly, let's not overlook state-based taxes, particularly land taxes. If your investment property exceeds the threshold, it's crucial to register for land tax. This proactive approach not only helps manage future liabilities but also allows for claiming it as a rental expense.


As always, we're here to guide you through these considerations and answer any questions you may have.

Your peace of mind is our top priority as we navigate through the intricacies of tax season. Looking forward to connecting with you soon.


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