The Advertiser (Adelaide) 29/5/06
Courtesy The Advertiser and journalist Tracie McPherson
Tax office puts spotlight on rental income
Negative gearing is under scrutiny by the Australian Tax Office.
Figures from the ATO show more than 1.4 million taxpayers declared total rental income of $15.2 billion and claimed rental deductions of $17.8 billion last year.
While rental income was up by about 12 per cent on the previous year, rental deductions claimed rose by 19.5 per cent.
The percentage of taxpayers reporting losses on rental investments has continued to rise.
In response, the ATO is increasing its compliance activity in this area to ensure these taxpayers are doing so according to the law.
People must keep comprehensive records when buying and selling an investment property and for all rental income and expenses.
The personal tax record keeper, available as a free download from the ATO website, aims to make it easy for individuals to maintain accurate and up-to-date tax records for their rental property.
Anomalies found by the ATO include:
OVERSTATING interest deductions by including sums related to borrowing expenses.
CLAIMING deductions for a property that is not genuinely available for rent, or not claiming partial deductions where a property is only rented for part of one year.
CLAIMING initial repair or renovation costs as repair and maintenance costs, rather than correctly attributing these to the capital cost of the property.
INCORRECTLY apportioning deductions related to private borrowings or travel.
