The Australia Tax Office has rental property deductions in its sights after discovering that 90 percent of landlords get their tax returns wrong.
ATO Assistant Commissioner Rob Thomson said landlords were regularly making mistakes on repairs and maintenance deductions on rental properties.
“This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,” Mr Thomson said.
“Our data shows nine out of 10 rental property owners are getting their income tax returns wrong.
“Performing general repairs and maintenance on your rental property can be claimed as an immediate deduction.
“However, expenses which are capital in nature (like initial repairs on a newly purchased property and any improvements during the time you hold the property) are not deductible as repairs or maintenance.”
Mr Thomson said, as “tax time” approached for 2023-24, the ATO would be concentrating on three of the biggest mistakes many people made in their tax returns. These are:
- Incorrectly claiming work-related expenses
- Inflating claims for rental properties
- Failing to include all income when lodging
“In 2023 more than eight million people claimed a work-related deduction, and around half of those claimed a deduction related to working from home,” Mr Thomson said.
“Last year, the ATO revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep.
“These changes are now in full effect this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction.”
The three “gold rules” for a work-related deduction were:
- You must have spent the money yourself and not have been reimbursed
- The expense must directly relate to earning your income
- You must have a record (usually a receipt) to prove it
Mr Thomson also urged people not to lodge their returns too early.
“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,’ said Mr Thomson.
“For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and help you get your tax return right.”
