About $45 billion in rental expenses were lodged to the Australian Tax Office
(ATO) last financial year, pushing property investors’ compliance with tax laws to the top of the Tax Office’s agenda.
The ATO is cracking down on taxpayers’ declaration (or non declaration) of short-term rental income, popularised by the likes of AirBNB and it’s a focus area for the regulator this financial year.
In order for a taxpayer to claim expenses on a holiday home, it needs to be genuinely available for rent. This is another area the ATO will be checking this financial year. This may require proof of advertising, proof of income and proof that time slots have not been blocked out by the owner using the premises.
The ATO are concerned about taxpayers claiming interest on a property loan that has been used for private purposes. For example, the ATO will be checking to see if a property loan is refinanced to buy a boat or a holiday.
Claiming immediate deduction
Taxpayers are entitled to claim the cost of repairs and maintenance immediately, but there are other adjustments to a property which are classified as ‘capital works’ and can only be claimed over a number of years as depreciation.