The Australian Taxation Office (ATO) has confirmed it will accept expense claims for short-term rental properties like Airbnbs that have sat empty as a result of the COVID-19 pandemic.
In a statement published ahead of the end of the financial year (EOFY), the tax office said landlords would be thrown a lifeline where COVID-19 or natural disasters had “adversely affected demand,” including booking cancellations.
The ATO has advised property investors to apportion their expenses based on the previous year, but clarified it would not accept deductions claimed for periods where properties were not up for rent but were instead offered to family or friends for free.
“Generally speaking, if your plans to rent a property in 2020 were the same as those for 2019, but were disrupted by COVID-19 or bushfires, you will still be able to claim the same proportion of expenses you would have been entitled to claim previously,” ATO assistant commissioner Karen Foat said in a statement.
Landlords with long-term rental properties have also been advised to include rental payments in their tax returns based on when they’re paid, with the coronavirus outbreak set to change the income affairs of property investors where tenants have stopped paying rent or have paid a reduced rate.
“While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arm’s length, having regard to the current market conditions,” the ATO said.
The tax office has also reminded landlords that insurance payouts due to rent reductions are assessable income and should be declared.
Common tax-time errors for landlords
The tax office published a list of some common errors on landlord tax returns, including:
- Travel to rental properties — You can’t claim expenses related to visiting your rental property for an inspection;
- Incorrectly claiming loan interest — You can only claim interest payments on property loans as tax deductions where the loan money is used for the property (not personal use);
- Capital works — Claims related to improvements or renovations on a rental property are classified as capital works and should be spread over multiple years;
- Short term rentals — Expenses can only be claimed for a period when a property is rented, or up for rent and not when a property is being used for personal purposes;
- Poor record keeping — Keep your receipts. This is the number one reason expense claims are knocked back.