The Commissioner has let us know some of the common errors they find in returns with rental properties. And it is quite a list:
– Stamp duty on the transfer of property. Unless you live in the ACT this is a component of the cost base.
– Other expenses that should be in cost base that people claim deductions for, including renovation costs (claimed as repairs and maintenance) and solicitors fees for purchase of the property.
– Legal fees in relation to family divorce proceedings.
– Borrowing expenses claimed in a single year, instead of being spread over five years.
But above all the Commissioner is concerned about the following:
– “… apportionment of income and expenses based on ownership holdings…” Especially where there are different taxpayers at different marginal rates. All based on ownership not contributions…
– “…claiming of expenses for vacant land…”
– “…apportionment of expenses for holiday homes…” If you stay in the property you will have to prove it was a last minute decision as no one had rented it for that period or you need to apportion the costs.
While not mentioned by the Commissioner my favourite one is the deductions under a depreciation report. I repair the light fittings that have got damaged (repairs are deductible) and claimed a deduction in year one. In year three I get depreciation report that says I can claim the amount a second time (under Div 40 or 43)…. Woops