When preparing rental property schedules, you may be relying on reports provided by property managers. While these reports are a useful starting point, they should be treated as informational as expense classifications may not reflect the correct tax treatment.
Common issues we see include:
- capital expenses (including initial repairs) being claimed as current-year deductions
- expenses grouped broadly without sufficient detail to determine the appropriate tax treatment
- discrepancies in accounting methods used when expenses are actually incurred versus when they are paid
- private expenses incorrectly included, such as costs relating to owners’ personal use of the property.
What tax agents should do
To reduce the risk of lodging incorrect claims on behalf of your clients, we recommend you:
- request invoices or work descriptions if the nature of the expense is unclear
- seek additional evidence, including photos, if invoice descriptions don't align with the nature or extent of the work performed
- confirm that the address on invoices and supporting documentation relates to the rental property, and not your client’s private residence or another property
- ensure capital works, depreciating assets, and repairs are correctly identified and treated
- explain to your clients why tax outcomes may differ from property manager summaries.
This review process is particularly important if significant expenditure has occurred or a property has been recently purchased. It helps ensure rental returns are accurately prepared, improves client understanding, and reduces the risk of audit or review arising from incorrect or overstated deductions.
For more information, see Rental properties guide.