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Is your rental property putting you in the ATO’s sights?
Does your business own an investment property?
Be warned: rental property is now a focus of attention for the ATO.
The ATO has announced a campaign targeting rental property owners due to concerns that a significant proportion of them are claiming tax deductions incorrectly on their properties.
As part of this strategy, the ATO will shortly be writing to over 100,000 rental property owners to make sure they understand their tax obligations and avoid some of the most common sources of error.
To help you understand your responsibilities, the ATO has also just released a fact sheet that clarifies the distinction between which deductions you can claim immediately for your property from those that need to be spread out over time.
In summary, you can claim an immediate deduction for:
- interest payments on a loan used to purchase the property or an asset used in the property;
- repairs and maintenance costs (but see my earlier bulletin for a discussion on the difference between repairs and improvements); and
- tenancy costs, such as getting the lease in order.
You can also claim a deduction over a number of years for the following types of expenses:
- loan establishment costs;
- the cost of depreciating assets; and
- the cost of the building and any structural improvements you make to the building.
Lastly, the fact sheet also identifies which expenses cannot be claimed as tax deductible. You are unable to claim a deduction for any of the following types of costs:
- deductions for rental properties that are not genuinely available for rent;
- loan establishment costs for the part of the loan that is used for private purposes;
- interest on a rental property that is now being used for private purposes;
- insurance premiums where your loan will be paid out if you die; or
- solicitor’s fees for services provided when buying the property.
You can find more information about which expenses can and cannot be claimed by following this link to the ATO’s fact sheet.
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Tags: Rental Property, Tax Deductions
