ATO expects bigger landlord tax deduction claims given COVID-19 rental income drop

The Australian Taxation Office assistant commissioner Karen Foat predicts there will be a significant rise in negatively geared investors who claim a bigger tax deduction when their COVID-19 rental income does not cover the expense of owning the property.

Despite low interest rates, Australia's 2 million landlords have also missed out on millions of dollars in rental income.

Landlords collectively typically declare about $43 billion in total rent and $47 billion in deductions, Ms Foat told Nine Entertainment, with around 60 per cent of rental properties negatively geared.

"But we also know that this year, there's a lot of landlords who are receiving a reduced amount of rent, whether that's because their tenants are paying less, or unable to pay at all, or if their property is sitting vacant," she said.

"We would anticipate that there is going to be a greater number of people whose properties end up negatively geared because they still claim the expenses but they are likely to have some level of reduced rent."

SQM Research managing director Louis Christopher anticipates a national 2.5 per cent decline in aggregate rents for the 2020 financial year, and a 2.5 per cent decline for the following year, bringing total rental income down to $40.9 billion.

This could lead to an extra $2 billion worth of losses claimed at tax time.