The Tax Office has rental property owners in its sights this tax season with a large number of mistakes, errors and false claims made by some using their own property for personal holidays.
The ATO is reminding owners they cannot claim deductions for holiday homes that are not actually available for rent or only available to friends and family.
Private use is entirely legitimate although it does reduce an owner’s ability to earn income from the property.
Properties must be genuinely available for rent to claim deductions. This means you cannot use the property for your personal use or let friends and family stay rent-free and claim a deduction.
For those who rent the property to friends or family at “mates rates,” they must only claim deductions for expenses up to the amount of the income received.
In addition to rental properties, the ATO is investigating cases where taxpayers claim their property is available for rent but there is no intention of renting it out. Rental rates well above market rates and unreasonable conditions for prospective renters are just a couple of ways owners can be doing this.
The ATO will also be scrutinising incorrect rental property claims. Data matching technology allows the Tax Office to pick up attempts at over-claiming regardless of whether the mistake was deliberate or an accident.
Property owners are advised to double-check their claims before lodging their tax return. They must remember to declare all rental income and only claim deductions for periods that the property is rented or genuinely available for rent at market rates.