Over the next four years, the Australian Taxation Office (ATO) intends to regain more than $1 billion in losses from wrongly claimed personal deductions, especially from negative gearing deductions for holiday homes, according to a report by The Australian.
ATO revealed that incorrectly claimed rental deductions are among the key reasons behind the annual $9 billion tax gap, or the difference between what ATO is supposed to collect and what it actually does.
ATO, in the 2018 federal budget, was granted $130 million over four years to increase its monitoring of personal tax deductions, and will focus on rental deductions. With this extra scrutiny, revenue is expected to climb by $1.1 billion.
One of the ATO’s findings was that many holiday-home owners were claiming deductions when their properties were not available to be rented, or when they were being occupied by family or relatives and friends for free.
In other cases, these owners claimed deductions for holiday homes that were not available for rent, and were advertised only by word of mouth or outside of holiday seasons. In some situations, homes were inaccessible or advertised with sky-high rents that decreased the chances of the property being rented.
Under the government's negative gearing laws, losses from rental properties can be claimed to offset an income-tax bill. However, ATO said that the practices above were clearly out of line.
An ATO spokesman said that such practices showed that the owner did not aim to earn income from the property and he or she might be keeping the place unoccupied for private functions.
Intentional manipulation of the tax offsets can cost an owner a penalty of as much as 75% on top of the wrongly claimed deductions, according to ATO.
Chris Richardson, Deloitte economist, said $1 billion over four years was not a huge amount, since rental losses reach more than $20 billion a year, but it was not surprising that ATO wanted the money back.
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