ATO Warning Depreciation

The ATO has sent our warnings about targeting Investor Claims. Some Landlords either advertently or inadvertently are lodging incorrect Statements when lodging their Tax Return to the ATO.

The ATO is now “cracking down”.

The ATO has just finished a major crackdown on taxpayers claiming work from home expenditure (clawing back over $600m in taxes) and have now declared that property investors are the next target, naturally due to the amount of money they believe is at stake.

A Depreciation Schedule allows you to claim the depreciation value of any part of a property that is subject to wear and tear e.g. carpet, window furnishings, paintwork, appliances …..

If a Landlord either refurbishes or renovates all or part of their property during a tax period, they cannot lodge the full value within that period. It must be depreciated over time and over the period legislated. For some items, that can be for a duration of two tax years but, some items are depreciated over 10+ years.

If a Landlord spends money on repairs/maintenance e.g. repair of a dripping tap, a blind repair, an appliance repair ….. they can claim the full cost within the tax period that the cost fell.

There are penalties for lodging an incorrect Tax Return. Property Investors that are seeking to pass capital works (property improvements) as maintenance are now a target. As you can imagine, capital works can easily fall into the $1000’s so, would reduce an investor’s taxable income to nothing or next to nothing if claimed incorrectly. Whether intended or not, some investors are incorrectly lodging and the ATO is creating warnings that they are on the lookout.

Here are a few more articles on the topic!

We strongly recommend this tax time you speak to your accountant and ensure that you are correctly lodging your Tax returns when it comes to depreciation.

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