Mistakes involving rental claims made up almost 20% of the total individuals-not-in-business tax gap for the 2018-19 tax period. That’s a whopping $1.6 billion. As a result, ATO audits have increased over the recent years.
The ATO have stated that the common issues involve record keeping, misstated income and deduction claims.
Record Keeping:
These mistakes can be avoided by discussing matters relating to your rental property with your trusted tax advisor well in advance. If you’re unsure what records you need to be keeping, then do get in touch.
Misstated Income:
Overlooking payments and misstating your income is another common mistake. Even if you have a short term rental, such as with Airbnb, you need to be consistently declaring the income that you receive from it, as you would with any long term rentals.
Should you hold onto any bond payments or get an insurance payout for your rental property, this too needs to be declared.
Deduction Claims:
Recently, the law has been changed to not include deductions for traveling to a rental property except for commercial property.
Depreciation of assets in relation to a renovation of the rental property for example, also needs to be taken into account. In most instances, it is not possible to claim outright for renovation costs, but rather these costs would need to be deducted over the lifetime of the said asset.
Capital Gains Tax Update:
A capital gains tax (CGT) exemption is now in place for granny flats. There are eligibility factors in place for this. For example, there must be a written agreement allowing an elderly person the right to occupy the property for life.
These are but a few of the points to be aware of as a rental property owner and it can become a little overwhelming. We can support you to ensure that you have the right documentation now and in the future to avoid ATO scrutiny. So make sure you speak with a professional advisor at Glance Consultants to ease the burden and ensure tax time is a breeze.
Contact our friendly team of trusted advisors on 03 98859793 or at enquiries@glanceconsultants.
