ATO Warns Taxpayers Who Are Making False Deductions for Holiday Homes

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The Australian Taxation Office (ATO) is cracking down on taxpayers claiming excessive deductions for holiday homes

According to Kath Anderson, Assistant Commissioner for the Australian Taxation Office (ATO), thousands of claims “that would fail the pub test” are a part of the $1.6 billion tax gap.

A total of 2.2 million property owners claimed $42.6 billion in rental expenses in 2021, but full compliance by the industry would generate an additional $1.6 billion in revenue.

At the Accountants Daily Strategy Day, a program of the sister brand of Mortgage Business, Ms Anderson stated that “holiday homes might sound minor in the scheme of things.”

“But if we applied the pub test, I don’t think we would find many Australians would think it’s OK for someone to claim thousands — in some cases hundreds of thousands — of dollars in deductions for their holiday home.

“Many of the returns that have errors in them have actually been prepared by agents. Often, clients are not telling their agents or providing them with all the information they should.”

Addressing accountants, Ms Anderson said: “We need your help to educate clients about what is a valid rental deduction and what’s not. We also need your help to get the message out there that claiming deductions and effectively taking money from the community to pay for your holiday home is not OK.”

The tax gap was previously $33 billion, according to Ms Anderson, and rental property claims were high on the ATO’s target list for 2022–2023.

“The gap represents an unfair advantage that those not doing the right thing have over those who are doing the right thing. And in the context of a business, especially a small business, this unfair advantage can be significant,” Ms Anderson explained.

This increased scrutiny means taxpayers should take extra care when preparing their tax returns for holiday homes. 

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