Holiday homes targeted in tax rort clampdown
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.
AccomNews is not affiliated with any government agency, body or political party. We are an independently owned, family-operated magazine.
Not sure how people can be bothered about claiming interest as negative gearing when every company claims mortgage deductions for any business startup and it continues till the loan is paid (clearly a business expense).
Surely a person in the property investment business can do the same. I’m not sure what is going happen when the Labor party implements it changes to negative gearing, but if they start here maybe small and big business will be next.
The point is that negative gearing and deductions on residential property were intended to boost supply of housing to be lived in, not subsidize the tourism industry. Tax payers are entitled to see their hard earned dollar used for social good, not the loss of their neighbourhoods that they have already paid for through all their other tax contributions. Businesses like Airbnb externalise the costs onto the whole community and extract maximum value from “assets” they don’t own and many individual “Hosts” are naïve about their responsibilities. The property investment business as you put it says a lot about people’s attitudes to their own self-interest. If people want to treat residential housing as an investment business, they can pay commercial rates and stop expecting the community to subsidize their business – especially in strata where ALL owners pay for their collectively owned facilities.