The Australian Taxation Office is to increase its scrutiny of the 1.8 million investment property owners this year.

The ATO is focused on people who are rorting the system and over claiming deductions. As part of this campaign, the ATO has recently stated it will write to investors with properties in popular holiday areas to remind them to claim only the deductions to which they are entitled.

Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. This is particularly important for holiday homes, where the ATO regularly finds evidence of home owners claiming deductions for their holiday property on the grounds that it is being rented out, when in reality the only people using it are the owners or their family and friends, often rent-free.

Another area of focus is where investors claim renovations or improvements as repairs and mainatenance. Putting in a new kithcen or a bathroom and claiming a deduction for the costs is a complete no no. At best you will only be able to claim a very small portion as depreciation over several years.