Helping taxpayers get it right this tax time on rental properties

This tax time the ATO is increasing its focus on rental property deductions and is encouraging all rental owners to double-check their claims before lodging their tax return.

They are paying particular attention to excessive deductions claimed for rental properties, especially those located in popular holiday destinations around Australia.

Assistant Deputy Commissioner Adam Kendrick said the ATO has identified a number of instances where taxpayers are claiming rental deductions for holiday homes that appear to be higher than expected when compared to the rental income being reported.

"We know that it can sometimes be challenging for rental property owners to work out what deductions they can and cannot claim on their holiday homes".

"As part of our prevention before correction approach we are sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods the holiday home is rented out or is genuinely available for rent," Mr Kendrick said.

There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.

Firstly, it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.

Secondly, rental property owners should only claim deductions for the periods the property is rented out or is genuinely available for rent. If a property is rented at below market rates, for example to family or friends, deduction claims must be limited to the income earned while rented.

Source: Australian Tax Office, September 2015