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Rental property income a tax target

06 June 2022

ATO announces focus areas for 2022

The Australian Taxation Office (ATO) has announced its four key areas of focus for the 2022 tax season. 

The ATO says emphasis this year will be placed upon:
• record keeping
• work-related expenses
• rental property income and deductions
• capital gains from property, crypto assets and shares.

The Tax Office highlights areas they believe pose a risk to the community and tax revenues, or simply where they believe people consistently make the most errors. 

Expenses and record keeping

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where people make mistakes. He suggests rethinking your claims and ensuring you can satisfy the three golden rules:
• You spent your own money and were not reimbursed.
• If the expense is a mix of income generation and private use, you can only claim the portion that produced income.
• You must have a record to prove it.

Loh recommends starting now and getting a jump on organising income and deduction records. He says this will ensure a smoother tax time but warns against claiming deductions you are not entitled to. The ATO he says will be taking “firm action” against people deliberately increasing their refund, falsifying records or making unsubstantiated claims.

Rental income and deductions

If you own a rental property, you must ensure you are declaring all of the income you received. This could include short-term rental arrangements, insurance payouts and any bond money returned.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs,” says Loh. “I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. 

“If we do notice a discrepancy, it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. 

“We can also ask for supporting documentation for any claim that you make, even after your notice of assessment issues.”

Capital gains

Assistant Commissioner Loh added that given the strength of the property market in recent years, any investor who sold real estate this year will draw additional scrutiny.

If you sold an asset, be it property, shares or crypto currency, you will need to calculate a capital gain or loss and include it in your tax return. A capital gain or capital loss is the difference between what you paid for an asset and what you receive when you dispose of it.

Loh also warned against relying solely on pre-filled information and suggested people double check that all the information is correct.

“While we receive and match a lot of information on rental income, foreign sourced income and capital gains events involving shares, crypto-currency and property, we don’t pre-fill any of that information for you,” said Loh.

He added that the ATO used data collection processes to track Australians buying, selling and exchanging assets and that it was important for people to understand their tax obligations at all times.