The ATO will "be paying close attention" to excessive interest rate claims, such as where property owners try to claim borrowing costs on the family home as well as rental properties, says Mark Chapman, communications director at H & R Block.

A focus will be incorrect apportionment of rental income and expenses between joint owners, such as where deductions on a jointly-owned property are claimed by the owner with the higher taxable income, rather than jointly.

Investors are on notice about making incorrect claims for newly purchased rental properties.

"The costs to repair damage and defects existing at the time of the purchase or the costs of renovations cannot be claimed immediately," says Chapman.

"These costs are deductible instead over a number of years. Expect to see the ATO checking such claims and pushing back against those that do not stack up."

ATO assistant commissioner Kath Anderson warns of a focus on taxpayers who shop around for tax agents

Brad Beer, chief executive of BMT Tax Depreciation, adds: "While rules state second-hand residential property owners cannot claim previously existing plant and equipment, they can claim on items they purchase and install in the property themselves after it is income-producing."

Airbnb landlords are eligible for deductions for expenses but the claims must relate directly to earning of income and will require receipts or records as evidence.


"Don't forget, the ATO has access to numerous sources of third party data including access to popular holiday rental listing sties such as Stayz and Airbnb, so it is relatively easy for them to establish whether a property was 'available for rent'," adds Chapman.

Holiday homes

Holiday home owners are a key target of the ATO, particularly those not making genuine attempts to make their properties available for rent.

Anderson cites a Victorian holiday house owner who earned about $27,000 rent during 2014-15 but claimed expenses of more than $700,000.

She says problems arise if property owners try to claim 100 per cent of expenses for times when their properties are routinely rented to mates at below market rates, are not available for rent during peak holiday periods and are deliberately unoccupied for about 90 per cent of the year. Others are leased under conditions that deter renters, such as unattractive minimum night stays, banning golfers or women who wear stilettos.

Anderson recommends those with home offices keep invoices, receipts, claims and diary accounts to prove spending on meals, mobile phone and internet costs that are work, or business, related

She says the ATO is aware of abuse of concessions by people claiming all their mobile phone, laundry, internet or dining expenses when they represent only a portion of total expenses relating to work or business and the rest is private.


Some people are also abusing the record-keeping provisions, which includes popular work-related car expenses claimed by nearly 4 million taxpayers, totalling nearly $9 billion.

"It is legitimate to claim for 5000 kilometres if you actually do them as part of earning your income," says Anderson. "But we are concerned some taxpayers mistakenly believe this is a standard deduction they are entitled to, without having to provide any evidence of having travelled that distance."

The ATO compares taxpayers to others in similar occupations earning similar incomes to identify work travel, or trips, not required as part of their jobs, she says.

Cryptocurrencies

Cryptocurrencies such as bitcoin are assessed for tax purposes as a form of property that are an asset for capital gains tax purposes.

The ATO is working with banks, AUSTRAC and state revenue offices (which collect revenues) to identify suspicious activity, particularly for property transactions.

The movement of cryptocurrency is anonymous but becomes traceable when converted into a fiat currency.

"While many believe cryptocurrency provides anonymity, operating in the digital world leaves electronic footprints," says Anderson. "We have sophisticated systems that allow us to match data from banks, financial institutions and online exchanges to follow the money back to the taxpayer."


Liz Russell, a senior tax agent for Etax.com.au, says losses on trading cryptocurrency can offset that amount from capital gains made on another asset in the same, or later, financial year. But net capital losses cannot be offset against other income. It is taxable when sold.

Holding cryptocurrency for more than 12 months as an investment might entitle the holder to a CGT discount.

"Whether it is a long-term investment or a short-term trading strategy, the potential tax consequences require taxpayers to keep records," warns Anderson.

Cryptocurrency payments for goods and services need to be recorded as ordinary income.

Family trusts

Family trusts are an increasingly popular structure for holding a family's investments, including property, shares and other assets, excluding the family home. Recent tightening of the superannuation rules is adding to their attraction.

All trust members' income is to be provided for the current financial year and usually an estimated income statement for the next. It is advised an accountant recommend the most tax-efficient ways to distribute any income.

Bill Nussbaum, a director at HLB Mann Judd, says: "The main thing is to work out how the income from the trust is to be distributed to the beneficiaries of the trust for this financial year. Trustees need to speak to their accountant about how the income from the trust will be paid, such as dividends, payments from a business or interest."

The trustee also has to make a formal resolution to the ATO in writing about the distribution before June 30, he says.

Advises say the "ideal" scenario for maximising distributions to beneficiaries is when there is a spouse paying little or no tax and young adult children who are not yet earning much. The tax on distributions to children is punitive, typically around 47 per cent on anything over about $1300.