PROPERTY may be a favourite investment for 1.75 million Australians but it's also a prized target for the Australian Tax Office audit team.
PROPERTY may be a favourite investment for 1.75 million Australians but it's also a prized target for the Australian Tax Office audit team. Property income and expenses feature strongly in annual tax returns with almost $33 billion claimed as rental expenses each year and $5.5 billion refunded through negative gearing.
According to ATO deputy commissioner James O'Halloran, there are up to 4000 property audits and reviews each year by ATO staff checking returns against the three big property tax areas: income, GST and capital gains tax.
One of the ways the ATO hopes to cut down on illegal activity and mistakes with property returns is through its new one-stop webpage dedicated to property-related tax questions.
"Property investment has its attractions but it also comes with responsibility and obligations to pay or report appropriately," Mr O'Halloran said yesterday.
"There's always a need for information; this offers a one-stop shop."
Tax accountant, author and Mr Taxman founder Adrian Raftery said some of the biggest areas of disputes in tax returns involved property assets.
"Incorrect interest claims, where there are split loans between private and investment purposes, and trying to claim interest on redraw amounts from an investment property loan when it has been used to buy personal assets (are common issues)," Mr Raftery said.
"Another common mistake is claiming initial rental property repairs or capital improvements as an immediate deduction.
"The old wives' tale of claiming two trips per year to visit your property is hogwash. You can claim as many trips as you like so long as the purpose of the trip is to genuinely inspect the property and not tagged on to a family holiday.
"It's important that you can explain and justify your claims. The ATO motto is: no receipt, no deduction. So you could be costing yourself greatly by not keeping those dockets."