Homeowners’ taxes are the focus of the ATO’s review

Tax authorities will be watching property owners closely this year after finding repeated reporting errors.

Income and income deductions from rental property will be a focus of concern for the Australian Taxation Office, which says monitoring and cross-checking is more advanced than ever.

Assistant Commissioner Tim Loh warned owners on Tuesday that the ATO takes revenue data from a growing range of sources, making it easier to spot inconsistencies.

He said getting it right the first time would avoid the taxman knocking on the door down the track.

“The amount of data we access increases every year, making it easier and faster for us to spot rental income you’ve billed your tenants but haven’t reported,” Loh said.

“We are concerned about errors, and in particular the omission of income or the deliberate over-claiming of rental property deductions.”

A random assessment process revealed that nine out of 10 tax returns reporting rental income and deductions contained at least one error.

He also found that this was despite most incorrect tax returns made with the help of a registered tax agent.

Mr Loh said it was important for landlords to check their records carefully and provide the correct information at tax time – and for agents to ask their clients the necessary questions.

“Registered tax agents can only work with the information they collect from their clients, and we know some clients won’t know everything they need to tell their agent,” Loh said.

“We don’t expect agents to be Sherlock Holmes, but we do expect them to ask the right questions to ensure their client’s return is correct.”

Deductions are an area where errors may intentionally or unintentionally be made, and proof may be required if requested by the ATO.

“You can claim expenses for the property as long as they are incurred for the purpose of producing rental income, not when your family and friends have stayed at the property for a mini getaway at friends rates, you l ‘use it yourself, say at Christmas, or you’ve stopped renting the property,’ Mr Loh said.

“Other circumstances where deductions cannot be claimed include claiming your property is available to rent when it really is not, for example you are advertising significantly above a reasonable market rate compared to similar properties, or you impose unreasonable restrictions on potential tenants.”

Originally published as Tax office issues blunt warning over common ‘mistake’

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