Data matching is already a widely employed practice in the rental sector. In August, the Australian Taxation Office (ATO) obtained property management data from software companies, covering 2.3 million landlords, building on an initiative that began in May 2021.

The ATO expressed interest in reviewing rental bond data as it enables the identification and rectification of taxpayers who fail to lodge their returns or report their tax obligations accurately. The ATO stated, “The rental bond data-matching program will allow us to identify and address tax risks.” It emphasized that taxpayers with rental properties may neglect to submit tax returns or rental property schedules by the designated due dates.

Additional concerns raised included landlords who either omitted or inaccurately reported income and deductions in their rental property schedules or income tax return labels, or incorrectly calculated the cost base elements when determining the net capital gain or loss of their rental property.

Furthermore, the ATO intends to use this data to scrutinize non-resident landlords, ensuring compliance with conditions related to foreign investment approvals, property use, and vacancy fees.

The ATO outlined the program’s objectives, which include identifying and educating individuals and businesses who may fail to meet registration or lodgment obligations. It aims to assist them in lodging their income tax returns, accurately reporting assessable income from rental properties, correctly claiming associated rental deductions, and ensuring compliance with capital gains tax obligations.

The data to be collected includes the names, addresses, phone numbers, and bank account details of landlords, tenants, and managing agents. Additionally, the ATO will collect rental bond transaction data, including property addresses, lease periods, commencement and expiration dates, bond amounts, rent payable, and payment frequencies. Property characteristics such as dwelling type, number of bedrooms, and bond numbers will also be captured, along with details of lodgment dates, statuses, refund amounts, and unclaimed bonds.

The ATO’s data-matching process incorporates over 60 identity-matching techniques to ensure accurate identification of taxpayers based on third-party data. The ATO anticipates that the rental bond data will meet a high standard, as state and territory tenancy laws are administered through advanced computer systems. The data will generally be retained for a period of seven years, though this duration may be extended based on ongoing reviews conducted at intervals not exceeding seven years.

Additional Rental Data Matching by the ATO

Audit issues that may arise include the following:

• Repairs vs. Improvements: There is often ambiguity between work that qualifies as a genuine repair (which is tax-deductible in the short term) versus work deemed an improvement (which is typically deductible over time). Even when work constitutes a genuine repair, it may not be deductible if conducted immediately after property acquisition and before tenants occupy the property.
• Bond Retentions: If part of a rental bond is withheld due to tenant-caused damage, the retained amount must be declared as assessable income. The cost of repairs associated with the damage is generally deductible.
• Interest Deductibility: Interest on loans used to acquire an income-producing property, or any other investment asset, is deductible, provided the property is being leased or is available for lease. However, if the loan is secured against an investment property to pay off the mortgage on a primary residence or for personal expenditures (e.g., purchasing a car or funding a holiday), the interest becomes non-deductible. The purpose of the borrowed funds determines interest deductibility.
• Availability of Holiday Homes for Rent: If a holiday home is not exclusively used for rental purposes, and is used by family or friends at reduced or no charge, issues may arise regarding the apportionment of expenses. Advertising a property at an unrealistic price does not qualify as genuinely making it available for rent, which impacts the apportionment of expenses.
• Inherited Property: A variety of capital gains tax (CGT) issues may emerge when selling an inherited property, especially if it has been used for rental purposes.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

If you own investment properties or high-value lifestyle assets such as boats or aircraft, the Australian Taxation Office (ATO) is closely scrutinizing these to ensure that your tax returns are accurate. The ATO has recently launched two new data-matching programs to assess the compliance of investment property owners and individuals with expensive lifestyle assets.

Data Matching Initiatives

The ATO’s new programs involve cross-referencing data from insurance companies to verify the value of lifestyle assets including fine art, private aircraft, yachts, and racehorses. This initiative aims to ensure that owners are meeting their tax and capital gains obligations correctly. The ATO announced these programs earlier this week.

According to the ATO, “The data will be acquired and matched to enhance our compliance risk profiling and provide a comprehensive view of taxpayers’ assets and accumulated wealth.”

From 2023-24 to 2025-26, insurance companies will supply records for assets in six specific categories. These include private aircraft valued at $150,000 or more and boats worth at least $100,000.

Investment Property Scrutiny

The ATO has also targeted investment property owners through a new data-matching program. This initiative comes on the heels of previous programs that reviewed residential investment property loan data and landlord insurance. The new program will gather data from property management software for the 2018-19 to 2025-26 financial years, covering:

• Property Owner Information: Names, addresses, phone numbers, dates of birth, email addresses, business names, and ABNs if applicable.
• Property Details: Addresses, dates the properties were first available for rent, property manager names and contact details, and bank details.
• Transaction Details: Period start and end dates, transaction types, descriptions and amounts, and rental property account balances.

In addition to these efforts, the ATO has been collecting data from state and territory governments since 1 July 2016, focusing on real property transfers reported quarterly. The latest program intensifies the ATO’s examination of landlords, targeting those who fail to lodge rental property schedules, misreport rental income and deductions, or inaccurately report capital gains tax (CGT) details.

Lifestyle Assets Examination

For lifestyle assets, the ATO is using data from insurance providers to cross-check ownership and value. This includes:

• Caravans and Motorhomes valued at $65,000 or more
• Motor Vehicles (cars, trucks, and motorcycles) valued at $65,000 or more
• Thoroughbred Horses valued at $65,000 or more
• Fine Art valued at $100,000 or more per item
• Marine Vessels valued at $100,000 or more
• Aircraft valued at $150,000 or more

The collected data will include policyholder details, purchase prices, and primary usage of the assets. The ATO is particularly focusing on individuals who are accumulating or enhancing assets without reporting them on their income tax returns, disposing of assets without declaring income or capital gains, incorrectly claiming GST credits, or failing to report fringe benefits tax (FBT) where assets are held by a business but used personally.

Conclusion

The ATO’s increased scrutiny aims to ensure compliance with tax obligations and accurate reporting for both investment properties and high-value lifestyle assets. If you are involved in either category, it is crucial to review your declarations and ensure they are accurate to avoid potential issues.

—————BOOK YOUR EXCLUSIVE 15 MINUTE ZOOM CONSULTATION————-

We offer a 15-minute no obligation consultation to existing property investors, first home buyers and small business owners who are looking at property investments, business and asset protection. To Book an Appointment simply click here and pick a time and date.

BOOK YOUR ZOOM APPOINTMENT HERE

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

---

General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.