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What you need to know about the ATO’s crackdown on property investors

By Andrew Bell

It's not common to receive a letter from the Australian Taxation Office (ATO) and if you do, it can be a bit stressful. Well, that's exactly what happened to two million property investors earlier this year when the ATO reached out to warn them about tougher new tax laws. 

The Office wants investors to know: they'll be on the look out for illegal claims, including travel-related deductions which were no longer eligible from 1 July 2017. 

As the end of financial year approaches, it's important for Gold Coast investors to ensure they're up-to-date with new regulations. Here's what you need to know. 

The ATO's warning to property investors

Travel-related tax deductions are just one thing the ATO has tightened up on. They've also enacted a law against claiming depreciation deductions for second-hand items in properties.

Holiday homes are of particular concern as well and investors who claim deductions for personal-use homes will be under close watch. 

As Assistant Commissioner Kath Anderson explains, "While private use by family and friends of a holiday home is entirely legitimate, it does reduce your ability to earn income from the property. This in turn impacts the deductions you can claim."

The new pieces of legislation were initially announced in last year's Federal Budget in response to widespread manipulation of the system. According to the ATO, having a portfolio doesn't qualify an individual as being in the business of rental properties and, therefore, shouldn't qualify them for various deductions either. 

All taxpayers with rental properties have been contacted about the ATO's promise to use "sophisticated systems and analytics" to ensure everyone plays by the rules. Even inadvertently false claims will be flagged by the system and investigated further by ATO tax agents. 

As Anderson warns, "incorrect rental property claims will not go unnoticed." 

What you can you still claim as a property investor?

While certain expenses have been ruled out, landlords can still make claims for expenses related to their property, including: 

  • Body corporate fees for strata titles, 
  • Cleaning, repairs and maintenance,
  • Insurance products, 
  • Land tax,
  • Legal expenses (i.e. borrowing costs),
  • Pest control,
  • Phone, 
  • Advertising, 
  • Appliances purchased for property, 
  • Gardening and lawn care. 

It's essential, however, that these costs were incurred when the space was rented or available for rent (ie. the property was advertised). 

Want to be sure you're on board with the ATO's new requirements? Working closely with an experienced property manager is key to avoiding incorrect claims. This is particularly true for new, inexperienced investors as well as those with several properties to look after. As an investor, you should be focused on adding value to your portfolio or finding a new asset to grow your wealth – not keeping track of paperwork. 

When you work with Ray White Surfers Paradise, your dedicated property manager will provide you with all invoices and receipts when it's time to file. Further, they can help you answer any questions about running your investments in an efficient, legal manner.

To find out more, reach out to the team at Ray White Surfers Paradise today. 

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