ATO is targeting rental property owners and work-related expenses

Peter Terlato 16 June 2016

tax return

This end of financial year, the tax department is cracking down on claims liabilities.

The Australian Tax Office (ATO) will be paying close attention to people claiming income and expenses on rental properties and pursuing the validity and authenticity of work-related entitlements.

Assistant commissioner Graham Whyte says the ATO will focus on excessive interest expense claims and incorrect apportionment of rental income and expenses between owners.

If you're planning on claiming deductions for a rental property, you'll need to ensure all rental income has been included on your claims statement, deductions for private use has been apportioned, and that the property was genuinely available for rent.

"We are also looking at holiday homes that are not genuinely available for rent and incorrect claims for newly purchased rental properties," Whyte says.

In a case study by the ATO, an individual who recently purchased a rental property and claimed deductions for repairs, capital works and borrowing expenses was forced to pay more than $57,000 in returns to the ATO and more than $10,000 in penalties for providing false tax receipts.

To find out how to properly list rental homes on accommodation websites, such as Airbnb and Roomorama, and understand the tax implications of this endeavour, check out our in-depth guide.

The tax office will also check income earned through the sharing economy, such as Uber drivers and Airbnb property owners.

In 2014, the ATO discovered $950 million in liabilities by cross-checking individual returns.

"The ATO’s ability to identify incorrect rental property claims is becoming more sophisticated due to enhancements in technology and the extensive use of data," Whyte says.

The most common deductions the ATO processes for individuals are work-related expense claims. In the 2013-14 tax year more than 8.5 million Aussies claimed $20.7 billion in work-related expenses.

Work-related deductions are meant for expenses that you incur as a result of your occupation. If you spend money in order to earn your income, that expense may be deducted from your yearly earnings.

"Generally speaking, if you claim a deduction you need to remember the three golden rules. One, make sure you spent the money yourself and were not reimbursed. Two, make sure it’s related to your job and three, you need a record to prove it," Whyte says.

There's also been changes in the way car expenses are calculated this year. Individuals must use a logbook or the cents per kilometre method to support their claims.

Most people can't claim the cost of travel between home and work. You can only make a claim if you use your own vehicle in the course of performing your duties as an employee.

This year, the ATO will undertake real-time checks as taxpayers complete their online returns.

The ATO will be paying extra attention to people whose deduction claims are higher than expected, including those for Internet and mobile phone use, deductions for travel, transporting bulky tools, and self-education.

Tax returns can be costly if you get them wrong. We answered the 20 most commonly asked questions to help you get it right.

And here are the ATO's ten tips for first time lodgers:

  1. Make sure you have a tax file number.
  2. Check if you need to lodge a tax return.
  3. Know your options - using a tax agent or self-lodging.
  4. Access ATO's online services, such as myTax.
  5. Claim your work-related expenses.
  6. Declare all your income.
  7. Fix mistakes as soon as possible.
  8. Patience is a virtue - the ATO receives and matches over 650 million transactions.
  9. Lodge by 31 October.
  10. Track your progress – returns are usually processed within two weeks.

Picture: Shutterstock

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