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In a bid to ensure property investors properly claim income and deductions this tax time, the Australian Tax Office (ATO) has revealed the expansion of its data-matching capability.
REB recently reported that the ATO would be collecting residential investment property loan data on 1.7 million individuals, thanks to its ability to obtain data from 17 Australian financial institutions.
Now, as the 2022–23 tax time looms, the ATO has revealed an expansion of its data-matching capability — data from property managers, landlord insurance providers, and financial institutions that provide loans for residential investment properties are among the new streams of intelligence being used to stop taxpayers from leaving out income or inflating their deductions this tax time.
In a warning to investors, ATO assistant commissioner Tim Loh said, “this isn’t a game of Guess Who”.
“Our sophisticated data-matching programs provide us with all the clues we need to track down taxpayers with incorrect information in their tax return.”
Mr Loh said the information gleaned through the data-matching process will be used “to identify and educate taxpayers who have made incorrect claims in their return”.
Longer-term, he explained that the ATO aims to make life easier for investors, by pre-filling “as much information as possible in future years”.
The ATO has previously raised the statistic that nine in 10 rental property owners get their tax return wrong, and did so again in the latest update. It’s these errors that have led Mr Loh to confirm the start of two new data-matching protocols this year.
They are investment loan data and landlord insurance policy information.
According to the assistant commissioner, “around 80 per cent of taxpayers with rental income claimed a deduction for interest on their loan, and this is where we’re seeing mistakes. For example, you can’t refinance an investment property to buy personal items, like a holiday to Europe or a Tesla, then continue to claim the interest expenses as a tax deduction.”
And alongside the new landlord insurance data-matching ability comes a reminder — insurance premiums paid for rental properties can be claimed as a tax deduction.
In the same vein, the ATO raised that any insurance payouts received in relation to an investment property need to be reported as income.
Mr Loh said the new data provides the ATO “with crucial intelligence to paint a picture of what’s true and accurate in tax returns”.
And while 87 per cent of taxpayers who own rental properties do use a registered tax agent to lodge their return, the assistant commissioner stressed that it is still important that taxpayers are providing the right information to their tax agents.
At the end of the day, it’s still the taxpayer who is responsible for what they include in their tax return, even when using an agent.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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