The Australian Taxation Office (ATO) has issued a timely reminder that it is keeping a close eye on deductions claimed by rental property owners, especially those with properties located in popular holiday destinations. MSI's Perth accounting member McKinley Plowman provides further information.
Last year the ATO identified a significant number of errors relating to deductions claimed for rental properties located in holiday regions. The ATO further reminds property owners that enhanced technology and data matching capabilities are allowing them to more easily identify suspect claims.
In general, property investors can claim a deduction for related expenses during the period when a property is rented or is genuinely available for rent. Owners are not prohibited from using their investment property for a private holiday, but deductions would need to be adjusted appropriately as the property would not be genuinely available for rent during such periods. Another area of concern is where the property is being rented out at ‘mate’s rates’, rather than the full market rate. In these cases, allowable deductions will be limited to the discounted rent that is charged.
