Property investors- watch out - the Australian Taxation Office (ATO) is after you!
The ATO will be compelling banks to hand over data for 1.7 million landlords in a bid to address the $1.3 billion tax revenue lost from residential investment properties.
The ATO’s data-matching program will focus on individuals failing to declare rental income, incorrectly claiming deductions, or not paying capital gains tax.
The program will collect data from 17 financial institutions, including Commonwealth, Westpac, NAB, ANZ, and mortgage provider RAMS, which are obligated to provide the information requested.
The data will include account numbers and balances, rental property details, and client identification details such as names, addresses, phone numbers, and dates of birth.
Closing the tax gap
The ATO's decision to collect landlord data is in response to an estimated $9 billion in tax revenue lost due to tax avoidance or errors by individuals.
Incorrect reporting of rental property income and expenses is a significant driver of the tax gap, accounting for $1.3 billion.
Common errors include failing to apportion loan interest costs after refinancing for private purposes, incorrectly claiming costs as repairs instead of capital works deductions, and not apportioning expenses for the private use of the property.
The data-matching program will run from 2021-22 to 2025-26 financial years and aims to catch individuals who fail to meet reporting or lodgement obligations.
It is also designed to promote voluntary compliance by taxpayers, including those who prepare their own tax returns using myTax, and prefilling details in systems used by tax agents.
The program will also identify relevant cases for administrative action, including compliance activities, and use the data for tax and superannuation compliance purposes.
Landlords will be given 28 days to respond to the ATO’s requests for information before any administrative action is taken.
The landlords can dispute any data obtained by the ATO, giving them a chance to resolve any discrepancies or inaccuracies.
The ATO’s data-matching programs help to fulfil its responsibility to protect public revenue and maintain community confidence in the integrity of the tax and superannuation systems.
What happened to the previous program?
Under an earlier data-matching program, the ATO obtained information about 1.6 million landlords from property management software providers for the period 2018-19 to 2022-23.
In February, the tax expenditure and insights statement revealed that 2.4 million people claimed $51.3 billion in rental deductions in 2019-20, reducing their tax bills by about $18.6 billion.
About 1.3 million people had a rental loss, known as negative gearing, which added up to total rental losses of $10.2 billion, reducing their tax bills by about $3.6 billion.
