The Australian Taxation Office (ATO) is ramping up its efforts to ensure property investors are paying their fair share of tax. Leveraging a sophisticated data matching system, the ATO is cross-referencing information from various sources to detect inconsistencies in rental income reporting.

If you haven’t yet filed your tax return for the 2023-24 financial year, it’s time to take action. The ATO is now comparing property management data with information from banks, insurers, rental bond authorities, and even sharing economy platforms.

Here’s what you need to know:

• Report all rental income: Include rental properties in your tax return, even if they’re vacant or you’re waiting for a tenant to move out.
• Claim expenses separately: Enter your gross (total) rental income and claim expenses separately on your tax return. This includes rental property expenses, such as repairs, maintenance, and interest.
• Split income and expenses: If you co-own a property, ensure each owner files their own tax return and splits income and expenses accordingly.
• Understand capital expenses vs. repairs: These expenses are claimed differently. Consult a tax agent if you’re unsure.

What about the main residence exemption?

While homeowners generally don’t pay capital gains tax (CGT) on the sale of their primary residence, there are exceptions. If you’ve been earning rental income from your home, whether it’s a room or the entire property, you may be subject to CGT.

Don’t get caught out. Ensure your tax return is accurate and complete. If you’ve made a mistake, don’t hesitate to contact a registered tax agent or amend your return.

Need more information? Visit the ATO website for details on capital gains tax and the main residence exemption.