The Australian Taxation Office (ATO) has recently cautioned property investors to be vigilant with their reported income and deductions during tax time. It has been found that nearly 90% of investors make errors in their tax returns.
Common Errors and Correct Deductions
ATO Assistant Commissioner Rob Thomson emphasized that while general repairs and maintenance on rental properties can be claimed as immediate deductions, capital expenses (such as improvements or initial repairs on newly acquired properties) must be depreciated over time.
“We frequently see landlords making errors with their repair and maintenance claims,” Thomson noted. This year, the ATO is particularly focused on inflated claims designed to offset increased rental income for better tax benefits.
Examples:
- Immediate Deductions: Fixing a broken window or replacing worn-out carpet.
- Capital Improvements: Renovating a kitchen or installing a new bathroom, which are only deductible over time as capital works.
To avoid mistakes and ensure your deductions are accurate, it’s crucial to follow the ATO guidelines or consult with a tax professional.