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As the tax deadline for the 2023–24 financial year approaches on 31 October, the Real Estate Institute of Western Australia (REIWA) has urged property investors to ensure their tax returns are accurate.
The REIWA has issued a reminder that the Australian Taxation Office (ATO) is using its data matching system to detect unreported income from property investors.
This mechanism operates by comparing the information included in property owners’ tax returns with data obtained from software providers, who are required to report details such as rent and expenses for residential properties managed by property managers.
The ATO is then able to cross-reference the collected information with rental data from “banks, landlord insurers, rental bond authorities and sharing economy providers” in order to detect any inconsistencies.
Due to this heightened scrutiny, REIWA warned that “if you have undeclared income, the ATO will find it easily and they’ll contact you for an explanation”.
To ensure accuracy when filing a tax return, REIWA advised property investors to:
- Include all rental properties in their tax return.
- Remember to enter gross (total) rental income as opposed to the net amount (after expenses) and claim expenses separately.
- Include any rental income received (including deductions) when purchasing a property with an existing tenant, even when waiting for the tenant to leave before moving in.
- Divide income and expenses according to legal ownership when a property is owned by more than one person as all owners need to lodge their own tax return.
- Understand the difference between a “capital expense, a repair and maintenance” as these expenses need to be claimed over different periods of time depending on when they are incurred.
Main residence exemption
The institution also highlighted that home owners who sell their primary residence may also qualify for an exemption from capital gains tax (CGT) through the main residence exemption.
Nevertheless, CGT may still apply if the home owner accrues income from their main resilience by:
