Related Articles
VIEW ALL ARTICLES
Each tax season, the Australian Tax Office directs its attention to specific areas where taxpayers tend to make mistakes, whether inadvertently or intentionally.
Rental properties have been under the spotlight in the 2024 financial year-end with the ATO announcing that, after a series of audits, they found errors in 90% of rental property related returns, amounting to a shortfall of close to $1.3 billion between the amount collected and the amount owing.
Some of the areas where inflated claims were found, included exaggerated deductions, particularly regarding interest payments, insufficient documentation to substantiate claimed expenses, holiday homes that were not genuinely available for rent and misapplication of Division 43 capital works claims on investment properties.
The ATO will closely examine property owners who attempt to claim borrowing costs for both their primary residence and rental property.
With this focus on inflated property depreciation claims, property investors must take proactive steps to ensure compliance. Below we have listed some ways to avoid scrutiny from the ATO on your investment property claims:
Keep detailed records of all expenses related to your rental property from the day of purchase, including receipts, invoices, and bank statements. This documentation will help substantiate your claims in case of an audit.
Avoid mixing personal expenses with investment property expenses. Maintain separate bank accounts and credit cards for your rental property to track income and expenses accurately.
Claim expenses only for periods directly linked to earning taxable income, ensuring that you divide claims considering
a. Non-rental use or vacancy periods.
b. Partial rental of the property.
c. Personal use or vacancy.
d. Below or above-market rental rates.
e. Report income and expenses proportionate to your investment share.
Consult with a qualified tax advisor or accountant who specialises in property tax matters. They can provide guidance on legitimate deductions, compliance with tax laws, and strategies to optimise your tax position.
Property depreciation isthe second-largest tax deduction available to property investors. To maximisethese deductions on your investment property, consult a Quantity Surveyor, likeBMT Tax Depreciation.
A property depreciation specialist will conduct a site inspection to ensure no potential claims are overlooked and that your depreciation claim complies fully with ATO regulations. You will then receive an ATO-compliant depreciation schedule, leading to significant tax deductions that will enhance your cash flow.
To learn more about preparing for the new financial year with property depreciation visit BMT, call 1300 728 726 or request a quote.
The information provided in this article is of general use only and should not be used as a quote or advice. BMT recommend consulting an accountant before making financial decisions. Contact BMT for a specialised tax depreciation schedule.
.svg)
