Rental property owners are being warned to ensure their claims are correct this tax time, as the Australian Taxation Office (ATO) doubles down on tax agents attempting to claim travel to residential rental properties despite the rules changing in 2017.
In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billion in deductions, the ATO revealed.
Assistant commissioner Gavin Siebert said that this year, the ATO has made rental deductions a top priority.
“A random sample of returns with rental deductions found that nine out of 10 contained an error. We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year,” he said.
When it comes to dodgy claims, the ATO’s detection methods are becoming more advanced.
“We use a range of third-party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinise every tax return.
“Where we identify claims of concern, ATO staff will investigate and prompt taxpayers to amend unjustifiable claims. If necessary, we will commence audits,” Mr Siebert noted.
The government recently allocated additional funds to the ATO to extend its program of audits and reviews of rental properties.
As a result, the ATO expects to more than double the number of in-depth audits it conducts this year to 4,500, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing.
“Once our auditors begin, they may search through even more data including utilities, tolls, social media and other online content to determine whether the taxpayer was entitled to claims they’ve made,” Mr Siebert said.
While no penalties will apply for taxpayers who amend their returns due to genuine mistakes, deliberate attempts to over-claim can attract penalties of up to 75 per cent of the claim. In 2017-18, the ATO audited over 1,500 taxpayers with rental claims, and applied penalties totalling $1.3 million.
“This tax time, our message to taxpayers is clear. If you are renting out a room or a property, any money you earn must be declared as income and any deductions you claim may need to be apportioned for private use,” Mr Siebert said.
