Holiday homes will be the focus of an Australian Tax Office crackdown on wrongly-claimed tax deductions.
The ATO says incorrectly claimed rental deductions are one of the major contributors to an annual $9 billion tax gap between what it should collect and what actually appears in treasury coffers.
In the 2018 federal budget, the tax office was granted $130 million over four years to increase its surveillance of personal tax deductions. The focus on wrongly-claimed deductions is expected to net the government more than $1 billion over the next four years.
One of its key targets are the claims holiday home owners make for rental properties which are either barely rented out at all or occupied by family and friends free of charge. Losses made on rental properties can be claimed to offset income tax under negative gearing laws.
“We are aware some holiday-home owners are doing the wrong thing and claiming deductions that they are not entitled to,” an ATO spokesperson told The Australian.
“Over the past year we have expanded our focus on incorrectly claimed rental deductions.”
Deliberately misleading the tax office over the offsets can attract a fine of up to 75 percent on top of the wrongly claimed deductions.
The ATO is cross-matching data provided by online rental websites against tax records and state and territory bond boards to identify taxpayers who may be incorrectly making deductions.
According to The Australian, steep interest rate rises on investor and interest-only loans mean the cost to the budget of negative gearing tax breaks for investment properties is estimated to have jumped by $1.6 billion a year. Under current negative gearing rules, interest payments on mortgages are tax deductible.
Labor has vowed to phase out negative gearing if in government, a move described by treasurer Josh Frydenberg as “damaging” to the housing market and the economy.