EOFY Looming

June 18, 2024 |
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As we are now already in mid-June (where did the time go?) it’s time that many investors will start thinking about preparation of their end of financial year tax return. Each year the Australian Taxation Office (ATO) highlights what areas they are particularly targeting, and this year (not for the first time) they are putting rental property owners on notice.

ATO Assistant Commissioner Rob Thomson has highlighted that many rental property owners are making mistakes on their tax returns, despite 86% using a registered tax agent; saying that one major ongoing issues is misunderstanding what expenses can be claimed and particularly distinguishing between repairs and maintenance versus capital expenses.

“Other errors include overclaimed deductions and insufficient documentation to back up the expenses claimed. By getting your tax return correct the first time, you’ll avoid having to fixing it up at a later date as well as the risk of being fined,” said Mr Thomson.

The ATO does cross-check data from banks, land title offices, insurance companies, and property managers, to verify the accuracy of tax returns lodged by property investors; so, it is critical to ensure you are not only using a professional but that you are providing them with comprehensive and accurate information.

Deductions are one area that is often misunderstood; and it can be a bit of a grey area in terms of fixing and replacing damaged items, some repairs can be claimed straight away but other capital items need to be claimed over time.

Interest on mortgages is one of the most commonly claimed deductions but also one of the most incorrectly reported, accounting for 42 per cent of the $1.2 billion Individuals Not in Business tax gap associated with rental properties.

Another era that can cause confusion and misreporting pertains to properties in community title schemes; while levy payments to body corporate administration funds and general-purpose sinking funds are deductible, special-purpose fund payments for capital expenditure are not deductible until the capital works are complete and the expense has been billed to the body corporate.

Ultimately the taxpayer is responsible for what they include in their tax return, even when using a registered tax agent, so you will be held accountable if any of the information in your return is incorrect or incomplete.

It is strongly advised you use the services of a reputable tax agent to assist you with lodging your return to minimise any chances of submitting a return that is going to attract the attention of the ATO for all the wrong reasons.

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