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Investment housing in the line of fire
Date: 5 August 2005
Source: Malcolm Maiden, The Age (Melbourne)
The Australian Tax Office has outlined its plan of attack for the year, and deductions claimed against house rental income are near the top of the hit list, with more than 3000 audits expected. Medium-sized business (revenue of $50 million to $100 million) is also in the ATO's sights.

The tax office focused on big-company tax last year, and pulled in an extra $6 billion, and ATO boss Michael Carmody says this will continue to be the ATO's main area of scrutiny. But he also signals a crackdown on the investment housing market.

If you own an investment property, ask yourself the following questions and hope you have the correct answers.

  • How much of the year has your property actually been available for rent? Claims for holiday homes and apartments must be apportioned to take into account time when the owner is occupying. If you are claiming for time when you are actually using the property, you have a problem.
  • Are you charging the market rate for rent? If you are not, your incomings are artificially low, and the negative gearing saving is artificially high. Rent deals with relatives are a classic example. They will be caught.
  • What capital allowance are you claiming? A 2.5 per cent capital allowance is claimable but it is claimable against the cost of constructing the investment property, not the price you paid for it, which is, of course, higher. If you claim against the purchase price, you can be brought to account.
  • What claims are you making for depreciation of fixtures and fittings? Aggressive claims in this area will definitely be probed by the ATO.

The ATO's probe of investment property claims is part of a continuing crackdown on residential property investors, who are also feeling the heat from falling property prices.

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