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The ATO's Rental Blitz - Tina Zawila


In a recent announcement by the ATO Commissioner Chris Jordan, errors in 9 out of 10 rental claims from over 300 audits have prompted a new compliance blitz by the ATO. And this week we have seen the first sign of this blitz here in Gladstone with an audit of the rental income and expenses declared in a taxpayer’s 2018 income tax return.


Given the level of property investment in Gladstone during the boom, followed by the crash in rental income in recent years, it’s no surprise that there are taxpayers with negatively-geared properties incurring high deductions in relation to income.


And this is just what the ATO is looking for.


When announcing the crackdown Mr Jordan was quoted as saying “We’re seeing incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent,” said Mr Jordan. “And when you consider that rentals include over 2.1 million taxpayers claiming $47.4 billion in deductions, against $44.1 billion in reported income, you can get a sense of the potential revenue at risk.”


The recent audit notice requested the following information:


Rental Income – how did you determine the amount of rent charged?

Advertising – how did you advertise your property for rent?

Purchasing the Property – why did you decide to purchase the property, and why in this location? Provide details of your investment plan/rental strategy.

Occupancy – who lived in the property, when, and for how long?

Apportionment – have you apportioned expenses if the property was only available for rent for part of the year, you used it for private purposes, you only rented part of the property, or you rented the property at non-commercial rates?

If you have an investment property – do you have all of this information readily available in the event of an audit? Are you sure your rental income and deductions are correct in your income tax return? If you need any further assistance or advice in relation to this matter, please contact the professional team at UHY Haines Norton on 4972 1300.

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