Ensure you are doing the right thing with your property-related claims this tax return season.

The tax office is paying close attention to rental property owners, especially those who own a holiday home, who incorrectly claim for initial repairs to recently acquired rental properties.

One key concern is people claiming expenses when the property is not genuinely available for rent. For example, if the property is only available for a set period of time and unavailable for other months of the year, claims can only be made for the period of time that the property was available for rent or rented out.

You may need to be prepared to answer questions such as:

  • How many days was it rented out, and was the rent in line with market values?
  • Where do you advertise for rent, and were any restrictions placed on tenants?
  • Have you, your family or friends used the property?

Answering questions like these can give us more information that assists us in determining if this is a valid deduction to claim.

With the ATO taking a broader approach in monitoring rental deductions, now may be the perfect opportunity for holiday home investors to review the rules surrounding holiday home tax deductions to ensure that they can address any risks or issues in a timely manner.

Areas where rental property owners are incorrectly claiming deductions include:

  • Claiming excessive deductions
  • Partners splitting income and deductions
  • Repairs or maintenance claims
  • Claiming for interest deductions.

Homeowners should be aware that it is not just holiday homes that are under focus by the ATO. The office will also address rental property owners who incorrectly claim deductions.

A common mistake that has risen among rental property owners is claiming deductions for initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing the property.

Taxpayers are not entitled to claim a deduction for any repairs made to their rental property for issues that existed when they purchased it, even if the repairs were carried out to make the property suitable for rent.

Instead, the cost of these repairs is used to work out any profit or capital gain when the property is sold.

Make claiming property-related expenses a hassle-free situation this tax season by consulting with your trusted tax agent. We’re here to help.

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