Tax authorities will be keeping a close eye on landlords this year after seeing repeated mistakes on returns.
Income and deductions from rental property income will be a focus of the Australian Taxation Office, which says oversight and cross checks are more advanced than ever.
Assistant Commissioner Tim Loh warned landlords on Tuesday that the ATO was taking income data from a growing range of sources, making it easier to spot inconsistencies.
He said getting it right the first time would avoid a knock on the door from the taxman down the track.
“The amount of data we access grows each year, making it easier and faster for us to spot any rental income that you have charged your tenants, but haven’t declared,” Mr Loh said.
“We are concerned about mistakes, and in particular, leaving out income or deliberate over-claiming of rental property deductions.”
A random assessment process found nine out of 10 tax returns which reported rental income and deductions contained at least one error.
It also found this was despite most of the incorrect tax returns being done with the assistance of a registered tax agent.
Mr Loh said it was important for landlords to carefully check their records and provide the correct information come tax time – and for agents to ask the necessary questions of their clients.
“Registered tax agents can only work with the information they gather from their clients, and we know some clients won’t know everything they need to tell their agent,” Mr Loh said.
“We don’t expect agents to be Sherlock Holmes, but we do expect them to ask the right questions to ensure their client’s return is right.”
Deductions are an area were mistakes can willingly, or unwillingly, be made, and proof could be required if asked for by the ATO.
“You can claim expenses for the property to the extent that they are incurred for the purpose of producing rental income, not where your family and friends stayed in the property for a mini getaway at mates rates, you use it yourself, say at Christmas, or you stopped renting the property out,” Mr Loh said.
“Other circumstances where deductions cannot be claimed include pretending that your property is available for rent when it really isn’t, for example you advertise significantly above a reasonable market rate compared to similar properties, or you place unreasonable restrictions on potential tenants.”
Originally published as Tax Office issues blunt warning on common ‘mistake’
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