ATO focus 2022 Rental Properties

2022 Tax Time: ATO focus on Rental Properties

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This 2022  tax time, the ATO has announced that one of it’s four key areas of focus is ‘income and tax deductions from rental properties’. In particular the ATO is concerned about the omission of rental income and deliberate over claiming of rental deductions.

The ATO is urging rental property owners to review their records before declaring income and claiming deductions. Here are some things to think about:

Include all Rental Income

Include all rental income, such as from renting out a holiday home, short-term rental arrangements and renting part of a home. Other rental-related income such as insurance payouts and rental bond money retained should also be included. Income and deductions must be in line with an owner’s interest in the property, which should generally mirror the legal documents.

Claiming Correct Deductions

Some expenses can be claimed immediately, such as rental management fees, council rates, repairs, interest on loans and insurance premiums.

Other expenses such as borrowing expenses and capital works are claimed over a number of years. Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Deductions that are not deductible include: travel expenses related to residential rental property, advertising pretending that the property is available for rent when it’s really not.

Selling a Rental Property

When a taxpayer sells a rental property, Capital Gains Tax (CGT) needs to be considered.

Keeping Good Records

Records of rental income and expenses should be kept for five years from the date of lodgement of the relevant tax return or for five years after the disposal of the property – which ever is longer. Ensure your records include how the expenses were incurred and how they relate to the rental income. Name of the supplier, amount of expense, nature of goods or services and date the of the expense are all required info.

If in doubt, contact our team for further clarification based in your individual situation.