Peak accounting body CPA Australia has warned that Australians who own rental properties will be under increased scrutiny from the tax office in the coming months.
The ATO is responding to a sharp increase in rental losses (where taxpayers are claiming rental expenses far greater than the actual rental income earned) in recent years. CPA Australia says the ATO will examine 6000 cases and contact tax agents whose clients have unusual patterns of rental expense claims.
The tax office is specifically looking for incorrect interest, excessive deductions for capital works, non-deductible initial repairs and borrowing costs claimed as fully deductible in the year they were claimed.
CPA Australia’s senior tax counsel, Mark Morris, says landlords need to be aware of when certain items can be claimed. For example, interest, body corporate fees, property agent commissions, council rates and maintenance can be claimed in the year they are incurred.
Other items, however, including borrowing costs, depreciation on fittings and fixtures, and some capital works, need to be claimed over a longer period.
Morris’s final bit of advice; make sure your rental documentation is in order and consult a tax agent if you are confused.
Marquette Turner recommends utilising the services of a quantity surveyor, as they will be able to assist you in maximising the tax depreciation potential for your investment properties. See our article of tax tips for investors for more information.