The ATO has created a hit list of worrying rental property deductions which includes holiday homes, spouses, repairs and loans.

BMT Tax Depreciation chief executive Bradley Beer said the first problem is excessive deductions being claimed for holiday homes, especially where claims are made for periods when the property has not been rented out or it is rented to family or friends below market rates.

The second area of focus is husbands and wives inappropriately splitting rental income and deductions for jointly-owned properties.

The third problem area is claims for repairs and maintenance shortly after a property has been purchased. These are commonly referred to as ‘initial repairs’ and are generally capital account and therefore not deductible.

The fourth area is interest deductions being claimed for the private proportion of loans.