The end of the financial year is just around the corner and the Australian Tax Office has got its eye on property investors.

According to ATO research, property investors as a whole paid about $1.3 billion less than they should have in the 2019-20 financial year.

An ATO review also showed 9 in 10 investment property owners were getting their return wrong. Common mistakes included rental income being left out and incorrect claims for property related deductions, such as overclaiming for improvements to private properties.

This year the ATO is particularly focused on interest expenses – specifically, ensuring property investors understand how to correctly apportion interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).

“You can only claim interest on a loan used to purchase a rental property to earn rental income – don’t forget, if your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income,” ATO Assistant Commissioner Tim Loh said.

The ATO also has a new weapon in its arsenal – a data matching system.

This allows the ATO to obtain data relating to residential investment property loans from authorised financial institutions for the period 2021-22 through to 2025-27.

This data includes:

• client identification details (names, addresses, phone numbers, dates of birth, etc)

• account details (account numbers, BSB’s, balances, commencement and end dates, etc)

• transaction details (transaction date, transaction amount, etc).

• property details (addresses, etc)

It will then be matched against ATO records.

“This is just one example of the work we are doing to help you get your return right and make sure people are claiming expenses correctly,” Mr Loh said.

For more information on preparing your tax return use these 10 tips from the ATO.