The Australian Taxation Office (ATO) are to target property investors. The Australian property market has been steadily growing for the last decade. Property investors have been able to utilise various practices to reduce their tax and increase their rental return. However, some of these investors might not comply with the law. The ATO has decided to look closely at all income and tax deductions from the property investment sector for this financial year. In this market insight, we are going to have a look at what investor activities are under the watchful eye of the ATO as we enter tax season.
Based on official publications, the ATO was very clear with its firm requirement and expectation on investors disclosing “all the income” from their investment properties. Here are the three most important areas under investigation:
- Short-term rental arrangements – Whether the lease agreement is one month or twelve months, the ATO expects the landlord to honestly report their income regardless if its a short lease. The common area where short term leases are being established are through Airbnb.
- Insurance pay-outs – Although insurance pay-outs for personal assets are not taxable, the ATO requires landlords to show evidence that the actual pay-out matches the actual claim.
- Rental bond money being retained – Landlords have often kept a large portion on the rental bond (or the entire amount) from tenants to repair any damages in their rental properties. From this financial year, the ATO requires the the total rental bond amount be disclosed reported.
The ATO has also urged property investors to keep good records. All rental income and tax deductions are required to be entered manually, whether it is prepared by investors themselves or by a registered tax agent or accountant. The ATO said “If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return,”. We can also ask for supporting documentation for any claim that you make after your notice of assessment .”
If you’d like to learn more about buying an investment property, please don’t hesitate to contact us. We would welcome the opportunity to help with your property purchase. Our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property investments.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
July 2022
