The Australian Taxation Office (ATO) announced that it would double the number of audits scrutinising rental deductions.
ATO has made rental deductions a top priority in 2019, according to Assistant Commissioner Gavin Siebert. “A random sample of returns with rental deductions found that nine out of 10 contained an error. We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year,” he said.
ATO’s detection methods have become more advanced. “We use a range of third-party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinise every tax return,” Siebert said.
Once a claim of concern is identified, ATO staff will investigate and prompt taxpayers to change unjustifiable claims. If necessary, the government agency will commence audits.
“We expect to more than double the number of in-depth audits we conduct this year to 4,500, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing,” Siebert said. “Once our auditors begin, they may search through even more data including utilities, tolls, social media, and other online content to determine whether the taxpayer was entitled to claims they’ve made.”
ATO said that no penalties would apply for taxpayers who amend their returns due to genuine mistakes, but deliberate attempts to over-claim can attract penalties of up to 75% of the claim.
In 2017–2018, ATO audited over 1,500 taxpayers with rental claims, and applied penalties totalling $1.3 million.
A sample case involved a taxpayer who was penalised over $12,000 for over-claiming deductions for their holiday home when it was not made genuinely available for rent, including being blocked out over seasonal holiday periods.
“This tax time, our message to taxpayers is clear. If you are renting out a room or a property, any money you earn must be declared as income and any deductions you claim may need to be apportioned for private use,” Siebert said.
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