Landlords are on notice with the Australian Taxation Office revealing most of them are doing the wrong thing on their tax returns and denying the community valuable funds for “women’s sports, schools and hospitals”.
It said that nine out of 10 landlords were getting their tax returns wrong and slammed those doing it deliberately “un-Australian”.
Leaving out rental income, over-claiming expenses, or claiming for improvements to private properties are just some of the errors ATO Assistant Commissioner Tim Loh said were commonly occurring.
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Now a range of resources has been released with a warning: “Landlords and their registered tax agents need to take extra care when lodging this year.”
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It pointed out to property owners where the money they save by incorrectly lodging a return is being siphoned from.
“When you are over-claiming expenses or claiming for improvements to private properties, you are taking money from the Australian community,” Loh said.
“Money that could have been otherwise used to further increase funding for things like women’s sports, schools and hospitals.
“If you’ve made genuine mistakes, we encourage you or your registered tax agent to fix any errors or omissions in your tax return as soon as you can. If you are deliberately over-claiming, it is un-Australian and penalties will apply.”
The ATO is cracking down on landlords, most of which are incorrectly lodging their tax returns. Credit: AAP
Double-dipping deductions is another mistake under the magnifying glass this year.
“Make sure you are declaring your gross income. We have seen some clients declaring their net rental income after the property manager has paid their expenses, and then they have claimed deductions like rates and repairs all over again,” Loh said.
The ATO is also focussing on interest expenses this year — making sure property owners understand how to correctly divide loan interest expenses, when part of that loan was used for private purposes.
Around 80 per cent of landlords made this mistake, the ATO said.
“If you’ve used any part of your original or refinanced investment property loan to cover private expenses, like buying a new car or renovating the home you live in, you can only claim an interest deduction for the portion relating to producing your rental income,” Loh said.
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Repairs and renovations were also confused by taxpaying landlords, the ATO said.
“You can claim an immediate deduction for general repairs like replacing a broken light globe or window,” Loh said.
“But if you rip out an old bathroom and put in a new and improved one, this is a capital improvement and is deductible over time as capital works.”
The amount of claimable expenses also changes when the property is being offered for “mates’ rates”, and this is another area the ATO said they were specifically cracking down on.
The ATO uses “sophisticated” data matching programs to analyse property-related data, property loans, and landlord insurance, “to paint a picture of what’s true and accurate in tax returns.”
It said that while 87 per cent of taxpaying landlords engage a tax agent, they themselves are responsible for ensuring their tax agents have all the correct information to include in the tax return.
For more information on the most common mistakes that landlords make when lodging a tax return, see the ATO fact sheet here.
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