SMSF property tax compliance on ATO radar
Buying an investment property through a self-managed superannuation fund (SMSF) offers potential tax benefits, including a concessional tax rate of 15%.
At the same time, navigating the tax complexities attached to an SMSF can lead to errors on your income tax return.
Many rental property owners are getting their returns wrong, which has attracted attention from the Australian Taxation Office. While this is not limited to SMSF property owners, SMSF trustees need to ensure all rental income is disclosed and that the correct rental deductions are claimed.
The ATO is actively data-matching tax returns with information from banks, insurance companies, and property managers to verify the accuracy of these deductions.
One area where errors creep in is when repairs and maintenance are done to rental properties. Some repairs are for the revenue account (which can be claimed), and some are for the capital account (which can’t be claimed).
For example, if you're replacing part of a fence that has collapsed or was damaged while the property is rented, you can deduct this from your tax return. If, however, you are replacing the entire fence as part of home upgrades, that’s a capital expense that is not tax deductible.
Interested in buying an SMSF investment property? Click here to discuss your options.