The ATO has warned taxpayers with rental properties that they are a “top priority” for tax time 2019 after finding that 9 out of 10 tax returns with rental deductions contained an error.

Taxpayers can expect audits to more than double to more than 4,500 with a specific focus on :

– overclaimed interest – whereby some taxpayers have been using some of the loan money for personal use such as paying for living expenses, buying a boat or going on a holiday, and then claiming the full amount of the loan interest as a deduction;

– capital works claimed as repairs – taxpayers have been warned to properly differentiate between capital works and repairs, and what is immediately deductible or over a number of years;

– incorrect apportionment of expenses for holiday homes let out to others; and

– omitted income from accommodation sharing – letting out of holiday homes to family and friends at below market rates will also be scrutinised.

The ATO uses a range of third-party information, including data from financial institutions, property transactions and rental bonds from all states and territories, and on-line booking platforms along with sophisticated analytics to scrutinise every tax return.

Finally, the ATO also reminds taxpayers that since 1 July 2017, the ability to claim travel to residential properties is no longer allowed.

If you would like to speak with a property investment tax accountant in Melbourne, contact us to arrange an appointment.