ATO crackdown on rental property tax claims

ATO crackdown on rental property tax claims


The ATO is currently targeting taxpayers who rent out their holiday homes for only a few weeks during the year but claim a full year’s worth of deductions on their tax returns

The tax office is will be paying close attention to rental property owners, especially those who own a holiday home who incorrectly claim deductions for initial repairs to recently acquired rental properties.

Last year, the ATO sent out letters across Australia reminding people to only claim deductions that they are entitled to for the periods that the rental property was rented out or genuinely available for rent.

While the majority of taxpayers who received those letters reduced their claims, the key concern that remains is over people who make claims for expenses during a time when the property was not genuinely available for rent.

With the ATO taking a more broad approach in monitoring rental deductions, now may be the perfect opportunity for holiday home investors to review the rules surrounding holiday home tax deductions to ensure that they can address any risks or issues in a timely manner.

Homeowners should be aware that it is not just holiday homes that are under focus by the ATO. The office will also commence addressing rental property owners who incorrectly claim deductions as well.

A common mistake that has risen among rental property owners is claiming for deductions for initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing the property.

Taxpayers should be aware and understand that they are not entitled to claim a deduction for any repairs made to their rental property for issues that existed when they purchased it, even if the repairs were carried out to make the property suitable for rent. Instead, the cost of these repairs is used to work out any profit or capital gain, when the property is sold.

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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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