Holiday homes in ATO's sights
The ATO has flagged a close interest in incorrect investment property tax claims as part of its compliance focus this year.
It says it will pay close attention to excessive interest expense claims, such as where property owners have tried to claim borrowing costs on the family home as well as their rental property.
It will also look at the incorrect apportionment of rental income and expenses between owners, such as where deductions on a jointly owned property are claimed by the owner with the higher taxable income rather than jointly.
In addition, the tax office will look at holiday homes that are not genuinely available for rent. Rental property owners should claim only for the periods when the property is rented out or is genuinely available for rent.
Periods of personal use can't be claimed. This is particularly important for holiday homes, where the ATO regularly finds evidence of home owners claiming deductions for their holiday pad on the grounds that it is being rented out when in reality the only people using it are them, family and friends, often rent free.
Finally, the ATO will keep a close eye on incorrect claims for newly purchased rental properties. The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately.
My key tip is to ensure that you keep good records. The golden rule is: if you can't substantiate it, you can't claim it, so it's essential to keep invoices, receipts and bank statements for all property expenditure.
Mark Chapman is director of tax communications with H&R Block