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Tax clampdown on landlords

Closer look: The tax office will clampdown on landlords' claims. Picture: Supplied

Three million landlords face tougher scrutiny from the Australian Tax Office, thanks in part to a property owner who had their daughter's wedding and an overseas trip paid for by taxpayers.

The tax office has revealed it will use the tax reporting season to focus on rental property deductions and "unusually large" expense claims.

One of the tax office's concerns is that landlords are getting more creative in their claims.

In one case, a person refinanced their rental property and ended up claiming all the interest on their loan as a tax deduction.

But a review of the person's bank statements showed some of the loan had gone to pay for their daughter's wedding and an overseas holiday.

Only interest related to the cost of the property should have been claimed.

Latest available figures show the nation’s three million landlords claimed $22.3 billion in interest. In WA, there were 317,000 landlords who claimed $2.8 billion in interest.

It’s not just weddings being paid for via negative gearing.

The Tax Office said it would be reviewing cases of people making “excessive” claims for holiday homes and where husbands and wives split rental income for jointly owned properties.

Tax officials will look at repairs and maintenance claims. It follows a case where a couple demolished their existing rental property and built a new one.

They sought to claim an immediate deduction when they were only entitled to claim the cost over 40 years.

It’s not just landlords facing a tougher tax time.

The ATO will be looking at unusually high work-related expense claims across all industries and occupations. Ordinarily, the tax office focuses on particular areas.

Improving technology will enable the ATO to track claims that differ from industry and occupational norms.

It will also look at claims that may have already been reimbursed by a person’s employer and private expenses such as travel from home to work.

In one case a man living in WA claimed more than $18,000 in expenses for moving to Victoria to take up a new job. He eventually reduced his expenses claim to $1300.

ATO assistant commissioner Graham Whyte said could be assured people they would not be penalised for making innocent mistakes on the office’s online myTax lodgement system.

“If you do accidentally get something wrong and it turns out you owe the ATO money, naturally you will have to pay the tax you owe. However the ATO will not penalise you for the mistake.”

“On the flipside, if you make a mistake and it turns out you are owed money, we will pay it along with any interest you are entitled to.”