NTAA guide to the biggest ever attack on rental properties
The ATO has specifically warned rental property owners to ensure their rental property deductions are correct in the wake of its announcement it will more than double the number of ‘in-depth’ audits (to an estimated 4,500) in a media release titled: ‘Tax office to double audits of dodgy rental deductions’ (‘the rental property media release’).
The ATO noted that in 2018, over 2.2 million taxpayers claimed over $47 billion in rental property-related deductions. Accordingly, rental property claims pose a major revenue risk. Further, the ATO reported that as a result of a recent review of a random sample of returns claiming rental properties, nine out of ten of the returns contained errors. It was further noted that 1,500 rental property audits conducted in 2018 raised penalties totaling $1.3 million.
In its rental property media release, the ATO highlighted a number of its current key rental property audit focus areas including the ‘usual suspects’ of:
- whether interest deductions are being claimed correctly (e.g., with increased attention to identifying if some of the loan funds have been used for private purposes);
- whether amounts claimed as repairs are more appropriately classified as capital works; and
- whether holiday homes being treated as rental properties are genuinely available for rent and being let on a commercial basis (i.e., not to friends and family at ‘mates rates’) and whether income derived from online accommodation platforms has been