Rental property crackdown after surge of incorrect deduction claims
Monday, Jun 17, 2013
The most recent financial year data from ATO records showed that almost 1.3 million people owned at least one investment property, and about two-thirds of those with rental property income reported a loss on the investment.
For the 2010-11 year, landlords claimed almost $39 billion in deductions for their investment properties, which is an 18% increase on such claims from the previous financial year.
A related trend identified by the ATO is an investor preference over recent times for bricks and mortar assets over sharemarket investments. A team of researchers within the ATO is using sophisticated analytical techniques, including data mining, to identify unusual patterns of claims made by property investors.
The ATO believes that investors are taking advantage of negative gearing, where the interest costs on borrowings used to buy property, and some other deductible costs, are more than rental income. The difference reduces the investor's assessable income for tax purposes.
The ATO is also targeting the work-related expenses of 218,000 building and construction workers, and sales and marketing managers. It has written to many of these taxpayers pointing out the increase in work-expense claims for these occupations, the evidence it has of a high occurrence of incorrect claims in last year's tax returns, and that taxpayers making such claims are advised to have back-up documentation.
About $18 billion of work-related expenses were claimed last financial year. One main problem the ATO said it has found with work-related expenses is taxpayers not separating private expenses from legitimate work-related ones. It said workers should make claims only where the expenses are incurred to earn an income.
Work expenses claimed incorrectly in last year's tax returns included sales managers claiming for mobile phone calls based on the time spent at work, rather than for work-related use.
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