Rental Property Claims and Their Errors

Australian Taxation Office (ATO) Commissioner Chris Jordan has addressed the Tax Institute Convention stating that incorrect rental claims contribute as one of the main drives of tax gaps in the Australian economy. In fact, the ATO’s auditors have recently completed over 300 audits on rental property tax deduction claims and “found errors in almost nine out of ten returns reviewed”.

Common errors that the ATO is finding is incorrect interest claims for entire investment loans where the loan has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent. Due to these common errors, the ATO’s next focus will be rental income and related deductions, to assist the taxpayers in reporting the right information, claim only the amounts they are entitled to, and close the tax gap.

The Commissioner concluded, “when you consider that rentals include over 2.1 million taxpayers claiming $47.4 billion in deductions, against $44.1 billion in reported income, you can get a sense of the potential revenue at risk. 85% of these taxpayers are represent by a tax agent (ie Progue) and together we are working with our clients to ensure that all rental property claims are accurate and there is a clear establishment of what can be claimed.



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