This article is from the Australian Property Journal archive
THE Australian Taxation Office is doubling the number of audits of rental deductions including searching through taxpayer’s social media accounts, after it found nine out of 10 returns were non-compliant – a warning to the 2.2 million residential property investors who claimed $47 billion in deductions in 2017-18.
Assistant commissioner Gavin Siebert said rental property owners are being warned to ensure their claims are correct this tax time.
Siebert said the federal government recently allocated additional funds to the ATO to extend its program of audits and reviews of rental properties.
With investors claiming $47 billion in deductions in 2017-18, Siebert added that the ATO has made rental deductions a top priority after the agency discovered that nine out of 10 returns were non-compliant.
“A random sample of returns with rental deductions found that nine out of 10 contained an error. We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year,” he said.
And when it comes to dodgy claims, the assistant commissioner said the ATO’s detection methods are becoming more advanced.
“We use a range of third-party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinise every tax return,”
Siebert said while no penalties will apply for taxpayers who amend their returns due to genuine mistakes, deliberate attempts to overclaim can attract penalties of up to 75% of the claim. In 2017–18, the ATO audited over 1,500 taxpayers with rental claims, and applied penalties totalling $1.3 million.
The ATO will have a specific focus on overclaiming and they may even search through social media accounts.
“We expect to more than double the number of in-depth audits we conduct this year to 4,500, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing,” Siebert said. “Once our auditors begin, they may search through even more data including utilities, tolls, social media and other online content to determine whether the taxpayer was entitled to claims they’ve made,”
“In one case, a taxpayer was penalised over $12,000 for overclaiming deductions for their holiday home when it was not made genuinely available for rent, including being blocked out over seasonal holiday periods. Another taxpayer had to pay back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.
“This tax time, our message to taxpayers is clear. If you are renting out a room or a property, any money you earn must be declared as income and any deductions you claim may need to be apportioned for private use,” Siebert said.
Australian Property Journal
