Landlords! Don’t Incorrectly Claim Expenses – Avoid Making Mistakes On Annual Returns



This past week the Sydney Morning Herald published James Massola’s article “Tax Office to crack down on Landlords, capital gains, work-related tax deductions”. Also The Daily Aus has reported on it too.


When it comes to Landlords, he emphasised that the ATO has plans to come down hard this financial year, as there have been incorrectly claimed expenses and mistakes on their annual returns. Massola claims a review found nine out of 10 Landlords have made these mistakes.


Here is a summary of points relating to Landlords from the article:

  • “…people claiming tax deductions who earn income by putting their homes on short-term rental websites like Airbnb or Stayz, or who run a business from home, but then dodge paying capital gains tax when they sell.”


  • “The ATO received $89.6 million in last week’s budget to implement the new crackdown, which is expected to increase Tax Office receipts by $474.9 million over five years.”


  • “The Tax Office has estimated that in 2019-20 there was a tax gap of about $9 billion as taxpayers paid 94.4 per cent of the total theoretically owed to the Commonwealth. Deductions for rental property expenses – such as people incorrectly claiming negative gearing deductions – contributed $1.3 billion to that gap.”
  • “Assistant tax commissioner Tim Loh said the Tax Office was targeting areas where people often made mistakes on their returns by, for example, leaving out rental income, overclaiming expenses or claiming for an improvement to their home – even though 87 per cent of individual rental owners use a registered tax agent to prepare their income tax return.

“We encourage rental property owners and their registered tax agents to take extra care this tax time and review their records before lodging their return,” Loh said.

“You can only claim interest on a loan used to purchase a rental property to earn rental income – don’t forget, if your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income.”


  • Real Estate Institute of Australia vice president Leanne Pilkington said the finding that nearly 90 per cent of landlords had made mistakes on their returns seemed high and “it would be hard to do”.

“At the end of a financial year your property manager sends you a detailed report of all of the income the property has generated and all of the expenses. All you need to do is forward that to your tax agent, including the interest you pay on your investment loan and that’s it,” she said.


  • Michael Croker, the tax lead for Chartered Accountants Australia New Zealand said it was “clear that self-preparers [of tax] and tax agents need to be hyper-vigilant this year”.

”The particular focus on rental properties shows they are a tempting area to gild the lily. Over time, you can build up equity [in an investment property] and you know, you have equity in your loan, so you draw down and buy your air tickets for a holiday,” he said.

“Don’t mix up your borrowing – keep it separate for your investment property.”

Click here for access to the full article by James Massola featured in Sydney Morning Herald on 15th May, 2023:


The Daily Aus have also summarised the ATO’s warning on their Instagram account:

  • The ATO has issued a warning for three focus areas that are of consistent mistakes in tax returns.
  • The ATO has said they’ll closely inspect deductions made by landlords, who they say are often leaving out rental income from their returns or over-claiming property-related expenses.


The post can be found here:



MCG Quantity Surveyors (no affiliation with John Pye Real Estate) have a free ‘ available in PDF that helps property Investors identify exactly what they need for the end of financial year.

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