Maximising Tax Benefits: 10 Ways to Avoid Tax Mistakes
According to the Australian Tax Office (ATO), approximately nine out of 10 investment property owners were submitting inaccurate tax returns. The ATO released a statement in May 2023 regarding a $1.3 billion difference in taxes collected compared to 2019-2020; this shortfall of $1.7 million needs to be accounted for. But how? Data-matching.
The ATO expanded its data-matching capabilities with data from financial institutions, property managers, and landlord insurance providers to ensure that all data provided to the ATO are accurate.
What Are The ATO's Data-Matching Capability and Its Benefits?
ATO's data-matching capability can gather relevant tax data such as transaction details, account numbers, and property details. The collected data will be matched with the current ATO records.
“The objective of this system is not only to benefit the Australian Tax Office but also to ensure taxpayers are getting their returns right”, as ATO Commissioner, Tim Loh, explained.
Through research, the ATO identified the possible causes for the inaccuracies are wrong input of data or the addition of other expenses, such as personal items - particularly when it comes to investment properties.
Aside from the data-matching system, the ATO released the following tips to avoid common tax mistakes this financial year.
- Properly allocate expenses and income for jointly owned properties
- Ensure your property meets the requirements for being genuinely available for rent
- Handle initial repairs and capital improvements correctly
- Boost your deductions for borrowing expenses
- Claim eligible purchase costs
- Deduct the interest on your loan appropriately
- Accurately account for construction costs
- Allocate the correct portion of your expenses for tax purposes
- Maintain accurate records to support your claims
- Understand the capital gains implications when selling your property.
Don’t forget to check what’s newly offered or tips and tricks released from the ATO every tax time.
Doing these steps may help you save time and money and potentially an audit. It will also assist with ensuring the amount you're paying for your tax is accurate. Rent Choice helps their landlord’s with compiling an income and expenditure report at the end of the financial year for client to submit to their tax accountant, making accountability transparent and simple.
