The Tax Office recently did a spot check on property investors’ tax claims, and found that nine out of 10 returns with rental deductions contained an error.

As a result, the Tax Office thinks it’s justified to up its audit activity.

It will be keeping a particular eye on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing.

Suspect claims

Audits from the 2017-18 financial year landed some investors in hot water, and out of pocket.

In one case, a taxpayer was penalised over $12,000 for over-claiming deductions for their holiday home when it was not made genuinely available for rent, including being blocked out over seasonal holiday periods.

Another taxpayer had to pay back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.

Property in the spotlight

Earlier this week, the Tax Office also warned it is keeping an eye on claims that investors make for travel to and from their investment properties.

In 2017, the rules changed, and investors are now not allowed to deduct travel expenses which are associated with their residential property investments.

Tax returns are still filtering through to the Tax Office with these tax claims in them. You can read more about it here.