TAX AUDITS

Haven’t heard? The ATO has said it is cracking down on landlords who are over-claiming tax deductions and those who don't declare income from short-term rentals such as Airbnb or Stayz.

So, this is a reminder to landlords: Ensure your various income tax reporting obligations have been met. For all the insights about ATO deductions, read on…

Why is the ATO targeting landlords?

According to the tax office, it often sees rental income being left out, or mistakes being made with property-related deductions, including people over-claiming expenses.

Each year, the ATO conducts a review of a random sample of tax returns to calculate the difference between the tax collected and tax that should’ve been.

For the 2017-18 year, it estimated a net tax gap of 5.6% or $8.3bn for individuals with rentals making up 18% of this net tax gap.

What should landlords do about it?

With the ATO checking that taxpayers that own income producing property are meeting their obligations to report the correct amount of income in their tax returns, landlords should simply ensure their tax returns are filed correctly and honestly.

What can landlords claim on?

With the help of a tax professional, landlords can claim all the deductions they are entitled to. In a nutshell, landlords can only claim deductions for the expenses that relate to the income-producing use of the property, including:

• Utilities (if paid by the landlord), insurance and operational costs.
• Expenses incurred for keeping a property in a tenantable condition.
• Interest on a mortgage.

What happens if a landlord is audited by the ATO?

If you have filed your tax return correctly, there shouldn’t be anything to worry about. However, a tax audit can come at a cost. The good news is, if you are covered with Landlord Insurance this cost should be covered under your policy.