Rental Property Update

The ATO is focusing on rental property owners to make sure that their deduction claims are accurate.

Here are the areas they are working on:

Interest Expense Claims on Rental Property

Your interest claim must equal the amount of interest relating to the borrowing for the rental property.  Don’t include any borrowing for any other purpose.  Private purpose draws on the rental loan will reduce the amount you can deduct as interest.  Interest is often a big ticket item.  As a result a mistake makes a sizable difference to you tax outcome.

What is your share of Rental Income and Expenses between owners of the rental property

You should claim your part of the rental property income according to the ownership you have in the property.  The way that rental income and expenses are divided between co-owners varies.  They are based on whether the co owners are joint tenants, tenants in common, or there is a partnership.  Joint tenants each hold an equal interest in the property.  They share the income and expenses on a 50:50 basis.  Tenants in common may hold unequal interests in the property.  For example, one person may hold a 20% interest and the other an 80% interest. This is usually written on the Contract of Sale document.  However, if you are carrying on a rental property business your share will be in proportion to your share of ownership in the business.

Rental income and expenses must be shared correctly to each co-owner according to their legal interest in the property.  This is irrespective of any agreement between co-owners, either oral or in writing, stating otherwise.

Travel Expenses now stopped

Travel expenses for inspecting, maintaining, collecting rent, repairing, or seeing your tax agent are no longer deductible backdated from 1 July 2017.  There is an exception for landlords of commercial property or when you are carrying on a business of rental properties.  Therefore you will most likely have less tax deductions for your rental property this year.