A common landlord mistake was to claim deductions for initial repairs made to a recently acquired property to get it ready for the rental market, the ATO told the Sydney Morning Herald.
The article also warned the ATO was honing in on property owners who rent out their holiday homes for a few weeks each year, but try to claim full-year deductions.
“Most landlords are aware they can claim repair costs and mortgage interest paid for their investment properties,” said John Knight of Brisbane-based advisory firm businessDEPOT.
“But they may not understand claims can only be made if the property was genuinely available for rent at the time the costs were incurred.”
The ATO website defines a property as available for rent if:
- the property is advertised, giving it broad exposure to potential tenants
- considering all the circumstances, tenants are reasonably likely to rent the property.
“It can be confusing, especially for first-time landlords, but talking to a tax specialist before you claim deductions will make sure you avoid potentially costly mistakes,” he said.
John also suggested a chat to a tax specialist before you purchase will make sure your decision is an informed one.
“If you’re planning to buy a renovator or a property that needs repairs make sure you know up front how much you can claim and when,” he said.
“You don’t want to count on claiming a tax deduction for a $50,000 repair bill only to find out the ATO won’t permit it.”
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