ATO Imposes New Tax Ruling Affecting Property Investors
The Australian Taxation Office (ATO) is going to impose a new tax ruling that will penalize some of the more than a million property investors in the country.
Reports say that the government agency is going after these property investors who have been claiming deductions for interest expenses and which have been applied to some loans.
The ATO said those who will be closely checked are property owners, who have structured their negative gearing from rentals to pay off home loans faster. The interest from investment loans are added to the principal, allowing the deductible debt to compound whilst the non deductible debt is paid off.
The ATO has been rejecting any arrangements like this since last month, and the ruling will apply to any tax return lodged in prior years and still in the period of review.
Tax expert Max Newham said loans that are absorbed or have incorporated other features will be hugely affected by the new ruling. These features include those that effectively increased a property owner’s capitalization of interest in their investment loans.
As a result, many investors will feel a crunch, especially if they have been relying on large tax deductions in order to help reduce costs and expenses.
The bad news for property investors is that the new ruling may become retroactive and can affect incomes and deductions from past payments.
Newham also said that property owners must learn to avoid making claims for deductions on interest in investment loans. The ATO does not have the exact figures as to how many investors are going to be hit by this new ruling.