Last year, the ATO found that 90% of deductions made by property investors contained errors, based on a random sample.
As a result, the ATO has been auditing more and more investors – about 1,500 in the 2017-18 financial year and about 4,500 in the 2018-19 financial year.
Here are three of the common errors cited by the ATO:
- Deducting 100% of the interest payments you make on your investment loan even if you divert some of the home loan for non-property expenses
- Deducting 100% of your renovations expenses immediately (capital works are deductible over a number of years)
- Deducting holiday home expenses when you’re not genuinely using your holiday home as an investment property
If you’re a property investor, you should take care this tax time, because the ATO is paying closer attention to investors. It may be a good idea to consult your accountant before you file your tax statement.
The ATO can cross-check your tax statement with data from banks, rental bond offices and Airbnb, so it’s important you declare all your income and claim only legitimate deductions.