Warning Bells for Property Investors

Property DeductionsA recent ATO audit has revealed that almost 90% of property investors who claim tax deductions on their rental properties are making errors.

At a recent speech in Hobart, Australian tax commissioner Chris Jordan reported that more than 2.1 million taxpayers are claiming $47.4 billion in deductions against $44.1 billion in reported income – that’s a whopping $3.3 billion gap. Looking at the scale of deductions claimed, “you can get a sense of the potential revenue at risk”, he said.

These comments should sound warning bells for property investors in the lead-up to tax time, with the ATO likely to focus its attention on investors claims around repairs and loans.

“We’re seeing incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent.” said Mr. Jordan.

The ATO has released a comprehensive guide to help investment property owners avoid common tax mistakes, which is essential reading if you’re claiming deductions on your investment property. Your best bet, however, to ensure the accuracy of your claims and full compliance with your tax obligations, is to get professional assistance. Accountants are fully up-to-date with new laws surrounding deductions, depreciation and other requirements for accurate reporting, and can save you thousands of dollars in the long run. And don’t forget, your Accountancy fees are tax-deductible!

Having said that, neither the best Accountant in the world, nor a 100% accurate lodgement, is any guarantee against an ATO Audit. With more than 600 million pieces of third-party data used to track activity and income, the ATO is relentless when it has a focus. And the costs of being properly represented during an audit can add up pretty quickly, when even a simple enquiry can sometimes require hours of work. We highly recommend you consider our Audit Shield service, which provides a cost-effective solution to guard against unbudgeted costs if a current or retrospective tax audit is sprung on you.

If you would like detailed advice about your property investment tax obligations, or further information about our Audit Shield service, simply call us on 9887 8751 or send us an email.