The ATO’s warning to investors
It’s almost financial new years eve, prepare the fireworks!! It’s also time to start looking at your taxes. Sounds exciting right?
Like clockwork, the Australian Taxation Office (ATO) has come out with a warning to taxpayers. The latest warning has been directed at Property Investors.
Over the last Financial Year, Australian’s have had a rough time. Bushfire’s, Flooding and Covid-19 has affected everyone. For Investors, this has resulted in large insurance payouts along with fluctuating rents and higher than normal vacancies.
The ATO has warned that despite a challenging year, taxes still need to be paid. Any insurance payments for loss of income need to be declared as taxable income.
Assistant Commissioner Karen Foat, of the ATO, recently said “It is important to remember that any payouts from these types of policies are assessable income and must be included in tax returns,”
The ATO also reminded Investors that on the 1st of July 2019, the Australian Government made changes to limit deductions for holding vacant land.
Ms Float further said, “For the 2020 year, expenses for holding vacant land are no longer deductible for individuals intending to build a rental property on that land but the property is not yet built.”
“So, if you are building a rental property, you cannot claim the deductions for the costs of holding the land, such as interest.”
The ATO has a keen financial interest in checking up on the tax returns of investors. In the 2017-2018 financial year, about 2.2 million investors claimed $50 billion in deductions relating to investment properties.
It’s a timely reminder that the ATO is watching. Each year they contact about 150,000 taxpayers to check up on investment-related tax returns.