Property income must be declared
THE Australian Taxation Office is reminding people who are renting out all or part of a property to remember that all income earned needs to be declared.
Deborah Jenkins, the ATO’s deputy commissioner for small business said it doesn’t matter if it’s only for one week of the year, or a few weeks here and there, every dollar needs to be confirmed.
“We know that most people try to do the right thing but we are concerned that some people don’t understand their obligations,” Ms Jenkins said.
“Unfortunately there are a few who know what their obligations are but seek to avoid them.
“As the community would expect, we have them in our sights.”
Ms Jenkins said the ATO collects information from a range of sources, including banks, other government agencies and suppliers and other third parties.
“We also get information about purchases of major items, such as cars and real property, and have the ability to compare this information against income and expenditure that taxpayers report to us,” she said.
“We are currently working with third parties in the accommodation sharing sector to provide greater visibility around these issues and to assist us in compliance activities.”
She also said to be aware of the Capital Gains Tax implications.
“Just like running a business from home, once income is earned from a primary place of residence and there are Capital Gains Tax (CGT) implications,” Ms Jenkins said.
“It is possible that if a property significantly increases in value, the amount of CGT owed may even be higher than the amount of income received.”
The ATO encourages anyone considering renting out part or all of their primary residence to seek independent advice about the tax implications.
Good record keeping will also assist in calculating the capital gain when the property is sold and only claim deductions you are entitled to.
“Deductions can be claimed against income earned through accommodation sharing, however it is essential that you keep good re- cords and apportion expenses appropriately,” Ms Jenkins said.
“You can only claim deductions that relate to the portion of the house which is rented out, and only for the length of time it is rented.
“Incorrect rental property claims will not go unnoticed.
“The ATO will always seek to assist taxpayers who may have made a mistake or unwittingly omitted income.”
Any taxpayer who thinks they might have made a mistake or needs assistance in understanding their obligations should contact the ATO or their agent.
More information on the tax implications of rental properties is available through the ATOs website.