Warning all Landlords and Investment homeowners - the ATO has launched a crackdown on the tax affairs of millions of landlords, targeting those who falsely claim rental deductions and minimise their capital gains liability by inflating costs.
The ATO has expanded its data matching program, forcing property management software companies to hand over around 2.3 million user records over a seven-year period from 2018–19 to 2025–26, according to a government gazette notice this week.
The data would be used to trigger compliance activities – that is reviews and audits of Taxpayers Income Tax Returns. It aims to improve risk models and educate taxpayers.
“The Australian Taxation Office will acquire property management data from property management software companies,” said an ATO representative.
Some of the information requested included property owner identification and property transaction details such as the account balance, income, and expenses.
The ATO will initially focus on landlords failing to lodge tax returns and their rental property schedule on time, as well as those who “omit or incorrectly report income and deductions in their rental property schedules and associated income tax return labels”, the ATO said.
Another major issue the ATO will target are omitted or incorrect reporting of Capital Gains.
“Taxpayers with a rental property may omit or incorrectly report cost base elements which are used to determine the net capital gain or loss on a rental property used to generate income,” they said.
The data matching program builds on an initiative that began in May 2021, which involved collecting four years of data between 2018–19 and 2022–23.
Its expansion comes as the ATO grapples with a significant tax gap in the rental property sector, with 90% of landlords getting their tax returns wrong.
Recent audits and tax reviews also showed that incorrectly claimed rental property expenses contributed $1.2 billion, or 12 per cent, to the total $10.2 billion tax gap for individuals not in business during the 2019–20 financial year.
The data collected by the ATO from software companies would include a thorough report of property owner identification details and transaction information for both residential and commercial properties.
This includes names, dates of birth, addresses, and contact information of individuals as well as business names, addresses, and ABNs.
This is a concentrated effort by the ATO on the residential Investment sector.
For further advice regarding ways on how to protect your position ring Steve Marsten on 07 3876 6211 at Appleby Accountants.
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