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The Australian Tax Office has warned property investors that it will be scrutinising their claims more closely this year.

More than 1.8 million Australian rental property owners claimed a total of $38 billion in deductions in the 2019-2020 financial year, according to a Yahoo Finance report. With that in mind, ATO assistant commissioner has flagged property investors for extra attention this year.

Loh said the most common mistake investors made was failing to declare all their income, including capital gains from selling an investment property or holiday home. The ATO has had to adjust 70% of property investors’ tax returns selected for review, Yahoo Finance reported.

“To put it simply, you should expect tax consequences for any property that you earn income from that isn’t your main residence,” Loh said. “We are expanding the rental income data we receive directly from third-party sources such as sharing economy platforms, rental bond authorities, and property managers. We will contact taxpayers about income they’ve received but haven’t included in their tax return.”

Some investors will be required to repay some of their refund, Loh told Yahoo Finance.

“The ATO often allows taxpayers who have made genuine errors to amend their returns without penalty,” he said. “But deliberate attempts to avoid tax on rental income will see the ATO take action.”

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Loh warned property investors to remember that there’s “no such thing as free real estate,” and that the ATO scrutinises returns for deductions that seem abnormally large.

“We will ask questions, and this may lead to a delay in processing your return,” he said.

Most Australian investors contacted by the ATO have been able to justify their claims, Yahoo Finance reported. However, there have also been instances where the ATO has rejected the claim. These have often been claims for interest charges on personal loans and immediate claims for the full amount of capital works like renovations, which need to be spread over several years.

Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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