ATO data matching identifies common landlord tax errors

The Australian Taxation Office (ATO) has identified several common errors property investors are making.

The ATO uses property management data that software providers are required to report and compares it to rent and expenses on your investor clients’ tax returns.

Property investors need to remember to:

• include rental properties in their tax return
• enter gross (total) rental income not the net amount (after expenses) and claim expenses separately on their tax return
• include any rental income received (and deductions) when they purchase a property with a tenant already in it, even if they’re just waiting for the tenant to leave before moving in themselves
• split income and expenses according to legal ownership when the property is owned by more than one person – all owners need to lodge their own tax return
• understand the difference between a capital expense, a repair and maintenance – these expenses need to be claimed over different periods of time.

If a mistake is made, they can talk to their registered tax agent or lodge their own amendment as soon as they identify the error.

What is the main residence exemption?

When a homeowner sells the home they live in, they’re selling their main residence and may be exempt from any capital gains tax (CGT).

However, CGT does need to be considered when a homeowner earns any income from their main residence. Common reasons include:

• renting out a room or the whole property, whether it’s on a short or long-term basis
• running a business from their home.

The ATO has a helpful factsheet that explains if a property owner is eligible for a main residence exemption.

Remember, only registered tax agents can provide tax advice.