Updated Compliance Program 2004-05 - This information was updated on 13 October 2005

Rental income and expenses

In their 2002-03 tax returns, 1.3 million taxpayers declared rental income of $13.7 billion and claimed rental deductions of $14.9 billion. Rental income was up by about 8% and claimed rental deductions were up by 13% on the previous year. This year we will increase our focus on income from rental properties and deductions for rental expenses.

We look for individuals who do not declare rental income or incorrectly claim rental expenses. A common error is where expenses are not apportioned, even though the property is not available for rent for the full year or only part of the property is used to earn rent. We are also concerned about deductions for legal expenses and other legal costs, and improvements to properties being incorrectly claimed as repairs.

We identify inappropriate claims by reviewing the information in returns. For example, large differences in claims for similar properties in the same geographical area may attract our attention. We also obtain information from state revenue offices on investment properties, holiday houses and units to help us identify taxpayers who may own more than one property.

We expect to send letters to 37,000 taxpayers before they lodge their returns, identifying our areas of concern. We also expect to conduct around 4,600 reviews or audits of rental income and expenses. As a result, we expect to see a reduction in incorrect claims and some adjustments to claims.

Sections within A. Individuals

• Registering in the system
• Reporting correct information
• Deductions for work expenses
• Rental income and expenses
• Capital gains tax
• Interest, dividend and employment income
• Tax agents
• Superannuation
• High-risk refunds
• International tax issues
• Aggressive tax planning
• Meeting lodgment obligations
• Meeting payment obligations
• How we help you comply