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In 2014 TAXVINE No 43 (21 November 2014), Member 187 wrote about receiving an ATO letter stating that the claim by a client for interest of less than $1,100 on a rental property 'may be incorrect' and that if no response was made to the letter within 28 days the deduction would be disallowed and an amended assessment issued.


The ATO thanks Member 187’s and other members’ feedback. The letter referred to by Member 187 has now been re-drafted. By way of background, the ATO has identified that a number of taxpayers are claiming:

  • repairs and maintenance for initial repair or renovation costs instead of attributing this to the capital cost of the property
  • borrowing expenses in a single year (instead of being spread over five years), and
  • deductions against rental income for legal and other costs that should be treated as capital expenses.

In an initial review of over 300 returns with rental legal and/or borrowers expense claims that were outside the average individual claim ranges, 6 out of every 10 returns reviewed required an amendment and were adjusted. The ATO is now expanding its review of expense claims of this nature."