June 12th 2024.
It has come to our attention that a majority of landlords have been submitting inaccurate tax returns, resulting in a significant loss of $1.2 billion for our nation. This is a concerning issue, especially since most landlords rely on registered tax agents to handle their tax returns. To address this problem, the Australian Tax Office (ATO) has issued a warning to property investors, reminding them to be cautious of their tax claims and expenses.
With the end of the financial year approaching in less than three weeks, the ATO wants to remind landlords to avoid overclaiming deductions, claiming expenses they are not entitled to, and not having proper documentation to support their claims. This is not the first time the ATO has raised this concern. Just a month ago, they reported that nine out of ten landlords had submitted faulty tax returns.
Further investigations by the ATO have revealed that these mistakes and misleading claims are being made by 86% of rental property owners who use registered tax agents. This is a significant number, especially when considering the $1.2 billion tax gap associated with rental properties. Assistant Commissioner Rob Thomson has expressed his disappointment in the number of landlords claiming expenses they are not entitled to.
He explains that while it is normal for landlords to make necessary repairs or replacements in their rental properties, not all expenses can be claimed immediately. For example, capital items such as dishwashers, curtains, or heaters can only be claimed over time, unless they cost $300 or less. The ATO has also noticed cases where landlords are claiming expenses that have already been included in the property's income and expenses report by their property manager. This is known as "double-dipping" and is considered fraudulent.
The ATO shared an example of a landlord who claimed a new cooktop, blinds, and air conditioners as immediate deductions, even though they should have been claimed as depreciating assets over time. To make matters worse, they also claimed a second cooktop for personal use, despite the rental property only having one kitchen. This raised red flags for the ATO, and upon further investigation, it was revealed that the landlord had not provided proper records to their registered tax agent, who also failed to question the claims.
As a result, the taxpayer had to pay penalties and interest, in addition to having their tax return adjusted by the ATO. This could have been avoided if proper records were provided and if the tax agent had questioned the claims. The ATO urges all landlords to be diligent in their tax claims and to seek advice from registered tax agents if needed. Let us all work together to ensure accurate and honest tax returns, for the benefit of our nation.
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