Yahoo Finance ATO boss warns taxpayers over common 'dodgy deductions'
Nine in 10 landlords are getting their tax returns wrong.
The Australian Taxation Office (ATO) is warning landlords that their tax returns will be under the microscope this year. They are being told “doubling dipping” on expenses and making other incorrect claims could land them in hot water.
Assistant commissioner Rob Thomson said the vast majority of rental property owners - 9 out of 10 - were making errors on their tax returns. That’s despite most of them using a registered tax agent.
Thomson said he is seeing landlords making “dodgy deductions”, including mistakes when it comes to repairs and maintenance deductions.
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“It’s normal for landlords to have to fix or replace damaged items in a rental property. But there is a bit of a myth that all expenses can be claimed immediately,” Thomson said.
“A repair can usually be claimed straight away but capital items, think dishwashers, curtains or heaters, can only be claimed immediately if they cost $300 or less, otherwise they need to be claimed over time.”
Landlords are also making big mistakes when it comes to “double dipping” on the same expense that has already been flagged by property managers.
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Overclaiming deductions for interest on mortgages is another common mistake, particularly when landlords redraw or refinance their loans and use some of them for personal purposes.
“It’s also not a matter of simply paying back the private part of the loan and then claiming all interest as deductible. Payments must be apportioned between the private and investment components for the life of the loan,” Thomson explained.
Landlords are being encouraged to carefully review their records before lodging and to make sure they have adequate documentation, including receipts, invoices and bank statements, to substantiate their claims.
ATO reveals hit list
Landlords are one of the three key focuses on the ATO’s hit list this year. The other focuses are work-related expenses and people who don’t include all their income when lodging.
Aussies are being warned not to “copy and paste” their work from home claims from last year and to make sure they have records to prove their claims.
The ATO has also told people not to rush into lodging their tax return on July 1. Information from employers, banks, government agencies and health funds will typically be pre-filled by the ATO at the end of July, so it’s recommended to wait until then to lodge.
You can check if your income statement is marked as “tax ready” and if your pre-filled information is available in myTax before you lodge.
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