Nine out of 10 landlords are getting their income tax returns wrong, and the ATO is watching

“Until then, renters may be seeking more shared accommodation or exploring cheaper rental markets across the outer-metro fringes or regional Australia.”

Nearly half of Australia’s 2.2 million rental property owners are negatively geared, which means expenses related to their rental property are greater than the income they earn from it.

Landlords can claim immediate deductions for general repairs and maintenance on a rental property. But Thomson said they could not do so for capital expenses such as improvements made during possession of the property or on a new purchase.

“You can claim an immediate deduction for general repairs like replacing damaged carpet or a
broken window,” he said.

“But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works.”

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Thomson said rental property owners should carefully examine their records and consider using an accountant to help prepare accurate tax returns.

“We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,” he said.

“Ensuring you provide full and complete records to your registered tax agent allows them to prepare your tax return correctly, so you claim everything you’re entitled to and nothing that you’re not.”

The Tax Office also remains focused on working-from-home deductions after revising the fixed-rate method of calculating them last year. The changes meant workers needed comprehensive records to back up their claims, Thomson said.

“Deductions for working-from-home expenses can be calculated using the actual cost or the
fixed-rate method, and keeping good records gives you the flexibility to use the method that
works for you, and claim the expenses you are entitled to,” he said.

“Copying and pasting your working-from-home claim from last year may be tempting, but this
will likely mean we will be contacting you for a ‘please explain’.”

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