Landlords will be under special scrutiny this year by the ATO, especially those who claim interest on property loans. What you can and can’t claim is a complex area and one that about 80% of taxpayers with rental income get wrong.
ATO Assistant Commissioner Tim Loh said “You can only claim interest on a loan used to purchase a rental property to earn rental income. If you’ve used any part of your original or refinanced investment property loan to cover private expenses, like buying a new car or renovating the home you live in, you can only claim an interest deduction for the portion relating to producing your rental income.”
Other areas landlords are getting it wrong include:
- Omitting some rental income
- Overclaiming expenses
- Claiming capital costs as repairs
Whilst these claim errors are not new, the ATO has new data matching systems which have been able to capture the relevant information for the first time making it easier for them to detect the taxpayers at fault. And they assure us penalties will apply.
Reportable rental income includes:
- Short-term rentals (Air BnB)
- Holiday rentals
- Renting out part of your home
Claiming all of your deductions for a rental property is a complex process, make sure you don’t get caught out and seek professional advice from your accountant or financial advisor.
At Oculus we know what you can and can’t claim and can take the stress out of tax time for you. Contact us if you have any queries.