We just came across a release recently issued by the ATO which highlights rental properties as one of its four focus areas this tax time.
In that release, the ATO urges rental property owners to ensure they carefully review their records before declaring income or claiming deductions. From its Random Enquiry Program, the ATO has found that nine out of ten tax returns that reported rental income contained at least one error.
Omission of income is one of the major issues the ATO has highlighted. We cannot stress enough that the ATO receives rental income data from a range of sources including sharing economy platforms, rental bond authorities, property management software providers, and state and territory revenue and land title authorities - so make sure you will retain all the information relating to the income, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained so that you can provide to us (or your accountant).
Sorting out expenses can be tricky as well, as some of them may be claimed straight away but the others can only be claimed over a number of years. Also, one of the pitfalls which has even unfortunately tricked some of our clients’ former accountants is that you can only claim the portion of expenses relating to the days/nights your property was rented out – in other words, you cannot just list your home on Airbnb and then expect ALL your water rates, electricity and mortgage expenses be tax deductible.
When we (or your tax agent) review your files and go through your books with you, don’t feel offended if you are asked a few extra questions. It is a tax agent’s foremost job to ensure your returns are completed correctly and you are free of tax compliance issues!
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