That’s the advice given by the Australian Taxation Office (ATO), on Friday (9 February). Deputy commissioner for small business, Deborah Jenkins said: “Every dollar needs to be declared.”
“We know that most people try to do the right thing but we are concerned that some people don’t understand their obligations. Unfortunately there are a few who know what their obligations are but seek to avoid them.
“As the community would expect, we have them in our sights.”
The ATO said it has the capacity to cross-reference data from banks, government agencies and third parties against data about car and real estate purchases.
With this in mind, the ATO said these are the three main tips it has when it comes to renting out part or all of a property:
1. Be aware of capital gains tax ramifications
“Just like running a business from home, once income is earned from a primary place of residence there are Capital Gains Tax (CGT) implications,” Ms Jenkins said.
“It is possible that if a property significantly increases in value, the amount of CGT owed may even be higher than the amount of income received.”
Noting this, the ATO said it encourages anyone considering partial or full rental opportunities to consult with an independent adviser and keep accurate records.
2. Are you entitled to this deduction
Think you can get away with that cheeky deduction? Not so fast. The ATO warned incorrect claims “will not go unnoticed”, flagging that it was using sophisticated data analytics and risk modelling.
As such, people renting out part or all of their property should note that deductions can only be claimed against the income earned through accommodation sharing, and only to the portion of the house that is being rented out.
3. Have you made a mistake?
The ATO said it will always try to help out taxpayers who may have made a mistake or accidentally omitted incomes.
“Any taxpayer who thinks they might have made a mistake or needs assistance in understanding their obligations should contact the ATO or their agent,” the ATO said.