ATO warns property investors about tougher new tax laws

FEDERAL Budget changes that make life tougher for real estate investors have become law and apply this year, and the Australian Taxation Office will be on the lookout for illegal claims.

TWO million Australians are being contacted by the Australian Taxation Office to remind them of tougher new laws for property investors, many who are likely to be confused at tax time.

A ban on travel-related tax deductions for most real estate investors, and restrictions on claiming depreciation deductions for second-hand items in properties, have both become law and apply this financial year.

“We know that taxpayers incur expenses throughout the year and it’s important for them to know that the rules have changed,” said ATO assistant commissioner Kath Anderson.

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She said all taxpayers with rental properties were being contacted, either directly or through their tax agents, and the ATO’s “sophisticated systems and analytics” would be checking claims this year to ensure people followed the new rules.

“We will be monitoring returns to identify people who continue to claim these deductions by placing them at different labels.

ATO assistant commissioner Kath Anderson says investors should know the new laws.

“If something doesn’t look quite right, it will send up a red flag and we’ll investigate further. So it is better to make sure you get it right the first time.”

The new rules, first announced in last year’s Federal Budget to stop people rorting the system, have scrapped travel deductions for all individuals apart from those in the business of property investing. The ATO says that owning one or several rental properties is not considered being in the business of rental properties.

“The number of people still able to claim a deduction is very small,” Ms Anderson.

However, the travel expenses option will remain open in the ATO’s myTax online lodgement system because of the handful of investors who still can claim.

H & R Block director of tax communications Mark Chapman said this could lull people into making an incorrect claim. “A lot of people tend not to be up to date with changes to tax laws,” he said.

Getting professional advice about the changes and new depreciation rules was more important than ever this year, Mr Chapman said.

“Depreciation has always been a fairly complex issue. It’s worthwhile having a tax agent take a look, and a lot of people get a quantity surveyor to look at what they can and can’t claim. If you are going to get the claim right, you need that professional involvement.”

The depreciation deductions ban only applies to second-hand items bought for an investment property after May 9, 2017. Items purchased before that date can be depreciated as normal.

Mr Chapman said new items bought for older investment properties could also be depreciated.

@keanemoney

Originally published as ATO warns property investors about tougher new tax laws