by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
REIQ Journal : July 2008
42 Property Management Rental deductions under ATO microscope By Mark Morris, Senior Tax Counsel, CPA Australia The Australian Tax Office (ATO) has warned the 1.5 million taxpayers who own rental properties that they will be increasingly vigilant in auditing rental deductions as rental losses continue to soar. THE ATO PLANS to examine 6,000 at-risk cases where material amounts have been claimed, and to contact tax agents whose clients have unusual patterns of rental claims. Last year the ATO sent out 65,000 review letters and completed 6,700 reviews or audits which raised additional tax revenue of $8.4 million. During 2005/06 rental property expenses outpaced income with recorded expenses increasing by 11 per cent as opposed to 9 per cent growth in income. The ATO is carefully scrutinising what rental property owners are claiming in their annual returns, so tax payers need to understand exactly what they can claim. It is critical that rental property owners have their books in order when they consult their tax agents at the end of the financial year and have up-todate records and copies of all relevant receipts for the year. They must also be sure that they only claim a deduction for certain expenses they incur for the period the property is rented or is available for rent. REIQ Journal July 2008 Rental property owners can generally claim expenses in the year they were incurred such as interest, body corporate fees, property agent’s commission, council rates, and repairs and maintenance. Landlords also need to be aware that while certain costs can be claimed as a deduction in the year incurred, other expenses must be claimed over a number of income years (such as borrowing expenses). The cost of rental assets such as furniture and fittings must also be depreciated over their effective lives, and deductions for the costs of constructing certain rental premises and other capital works must be claimed over their statutory lives. It is critical that rental property owners have their books in order when they consult their tax agents at the end of the financial year... Expenses not actually incurred by the taxpayer, such as water or electricity charges borne by the tenants, and expenses that are not related to the rental of a property, cannot be claimed. The ATO has also advised that their audits will focus on incorrect apportionment of interest claims, excess deductions for capital works, non-deductible initial repairs and borrowing costs claimed as fully deductible in the year they are paid. For more information, visit the ATO website at www.ato.gov.au