This approach comes in response to an overall decrease in tax paid. Property investors can expect to see more rigid measures such as this as government agencies attempt to ensure compliance and keep ATO revenues at the proper level.
In a recent statement, the ATO stated that they will be writing to over 110,000 owners of rental properties about topics including obligations and entitlements. These notices will be meant to ensure that all tax returns are completed and submitted correctly.
To facilitate the completion of tax returns, the ATO has provided a host of tips for property investors. These are meant to assist investors in terms of what can and cannot be claimed. For those who receive rental income, the full amount of rent earned during the year must be submitted to the ATO.
Rental-related income can cover a wide range of payments received by property investors. This includes insurance payouts in certain circumstances, letting and booking fees, and reimbursement for any deductible expenditure. This means that if you received any money from a tenant to repair damages, it will need to be included in your declared rental income. Landlords must also declare any rental bond money received. This could be retained due to a tenant defaulting on the rent or due to property damages.
These are just a few examples of the types of deductions and claims that are required to be submitted to the ATO. For a full list, it's important to speak to an accountant or read the agency's website carefully.
To help assess returns, the ATO is using data mining technology. This is capable of compiling real property data, and then correlating it with income tax returns. The technology compares the two sets of data to ensure that all information matches up correctly.
Because nearly two-thirds of property investors are negatively geared, most investors will choose to look for all deductions possible as they complete tax returns. This can help minimise potential cash losses. Yet it's important to complete returns accurately, particularly as the ATO is paying closer attention this year.
Interest tends to be the highest expense for any property investor, so a potential strategy to reduce interest could lower overall expenses.
Source: Australian Taxation Office (17th July 2013)
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