The ATO Audits into self-preparers have uncovered nine out of ten tax returns reviewed were filed with errors.

The most common errors discovered from ATO Audits on Rental Property Tax Returns have been: –

• Leaving our rental Income
  • This may be due to holiday letting. Share Economy Accommodation Platforms like Airbnb and the like!
  https://umbrellaaccountants.com.au/property-knowledge/cgt-on-the-sale-of-your-home-with-a-granny-flat-or-ancillary-dwelling-used-for-private-business-or-investment/
  • Granny Flat Rentals on a commercial basis, rather than to family!
  • Shared Accommodation, boarders paying rental income for a bedroom and the like.
• Overclaiming expenses against rental properties
  • Claiming for improvements to private homes against rental properties
  • Claiming initial repairs required when buying a property as an outright expense, when these initial repairs were legacy issues at the time of purchase.
• Overclaiming interest deductions, “Around 80% of taxpayers with rental income claimed a deduction for interest on their loan, and this is where we see mistakes, “ATO Assistant Commissioner Time Loah states.
  • Using the equity in existing investment properties to refinance for personal items, such as holidays, school fees, new cars, and improvements to personal home, the additional loans and associated interest continued to be claimed as interest deduction against the rental property, when there is no nexus to the increased debt or interest to the original rental property.

There are many opportunities to structure income and expenses to be tax effective to reduce tax without drawing unnecessary attention to an ATO Audit.