ATO Focus on Rental Properties

As seen in Woopi News October 2022

The ATO has issued a release highlighting rental properties as one of its focus areas for the 2022 tax year. It’s an area that is easy to get wrong and extra care needs to be taken when including a rental property schedule in your tax return. Rental property owners need to carefully review their records before declaring income or claiming expenses and should know what income they need to declare and what deductions can be claimed.

One concern is leaving out income. All rental income such as short term and holiday rental income (including Airbnb), renting only part of a home, insurance payouts and rental bond money that has been retained needs to be included. As the ATO now receives data from a range of sources including sharing economy platforms, rental bond authorities and real estate agent property management software providers it is easy for the ATO to identify any rental income that hasn’t been declared.

Another area of concern is making sure deduction claims are correct. Expenses can only be claimed for the period a property was rented or when you were actively trying to rent it out. Some expenses can be claimed immediately including rental management fees, council rates, repairs, interest and insurance premiums. Other expenses need to be claimed over several years including borrowing expenses, capital works (including replacements and renovations) and new depreciating assets (assets costing more than $300). Any interest claimed on a loan is limited to the amount relating to the rental property, you can’t claim the interest on the part of the loan used for personal use. Deductions also need to be apportioned in line with your ownership interest, when only part of it the property was rented or if it was used by yourself or friends and family at below market rates.