Each year the Australian Tax Office (ATO) places EXTRA emphasis on particular areas of individual tax returns. This year the ATO will be focusing on claims made by owners of investment properties and holiday homes.
Apportionment of Rental Income and Deductions
Apportionment of rental income and deductions must be split between the owners based on their legal ownership. Rental income and expenses must be attributed to each co-owner according to their legal interest in the property, despite any agreement between co-owners, either oral or in writing, stating otherwise.
Interest deductions for private portions of loans
Where a loan has been used to secure an investment property or holiday home the interest portion of the loan repayments are eligible for a deduction. In instances where a loan has been acquired to purchase multiple assets only the interest component relevant to the investment property or holiday home is deductible.
Repairs and Maintenance
Repairs and maintenance that relate to wear and tear made to the property are generally deductable if it relates damage that occurred as result of renting out the property. Repairs to damage that existed before the purchase of the property are not deductable expenses.
Deductions should only be claimed for periods in which the property is genuinely available for rent. In instances in which the house is rented to family and friends below market value the deductions may be reduced. Similarly if there is no genuine attempt to rent out the property the ATO will disallow such claims.
It is important that when claiming deductions for your investment properties and holiday homes you only claim what you are eligible for. The ATO through utilisation of data matching initiatives is able to identify individuals who may be incorrectly claiming certain deductions or not declaring all income.
If you wish to legally maximise your deductions please contact us at The Quinn Group on (02) 9223 9166 or submit an online enquiry. Our team of expert accountants and lawyers will be happy to assist.