ATO increases focus on rental property deductions

The ATO has advised that it will have an increased focus on rental property deductions this Tax Time.

It says that it will be paying closer attention to excessive deductions claimed for holiday homes in 2015, and will also be actively educating rental property owners about what they can and cannot claim.

For example, the ATO will be writing to rental property owners in popular holiday locations, reminding them to only claim the deductions they are entitled to, for the periods the property is rented out or is genuinely available for rent.

Holiday homes

The ATO said that it recently amended a taxpayer’s return to disallow deductions claimed for a holiday home after discovering that:

  • the taxpayer rented the home to family and friends during the year at less than market rate;
  • except for a brochure which was only available at the taxpayers’ business premises, there were no realistic efforts to let the property;
  • the nightly rent advertised was much higher than that of surrounding properties; and
  • the pattern of income did not match the advertised rate, or the requirement for a five-night minimum stay.

The ATO decided the property was mainly used by the taxpayer, and deductions were limited to the amount earned from family and friends.