ATO doubles down on threat to target property investors

The Australian Taxation Office (ATO) has doubled down on its assertion that property investors are firmly in their sights this tax season.

The ATO on Tuesday (13 June) revealed it had expanded its data-matching capability, with property investors in the crosshairs.

New data is now rolling into the ATO from property managers, landlord insurance providers, financial institutions providing loans for residential investment properties and sharing economy providers, as well as income protection policy information.

ATO Assistant Commissioner Tim Loh said, “This isn’t a game of Guess Who, as our sophisticated data-matching programs provide us with all the clues we need to track down taxpayers with incorrect information in their tax return.”

“We will use this information to identify and educate taxpayers who have made incorrect claims in their return, with a longer-term plan to pre-fill as much information as possible in future years,” Mr Loh said.

The ATO’s latest declaration of war against property investors who may, deliberately or otherwise, get their property investment-related tax deductions wrong, follows its announcement in April that it will access the bank transaction data of 1.7 million property investors as part of a massive crackdown on tax evasion among landlords.

The ATO said nine out of ten tax returns from rental property owners were getting it wrong.

Mr Loh confirmed two new data-matching protocols start this year for rental investors, including investment loan data and landlord insurance policy information.

“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.”

Tim Loh, Assistant Commissioner, ATO

With the new landlord insurance data-matching protocol, the ATO is reminding taxpayers that insurance premiums paid for rental properties can be claimed as a tax deduction.

Similarly, any insurance payouts received in relation to an investment property must be reported as income.

“This new data provides us with crucial intelligence to paint a picture of what’s true and accurate in tax returns,” Mr Loh said.

Even though 87 per cent of taxpayers who own rental properties use a registered tax agent to lodge their return, Mr Loh stressed the importance of taxpayers providing their agent with the right information to prepare their return correctly.

Regardless of who submits the return, taxpayers are responsible for what they include in their tax return.

The ATO is legally permitted to carry out its external data matching under laws that include the Privacy Act 1988, the secrecy provisions of the Income Tax Assessment Act 1936, the Taxation Administration Act 1953 and other tax laws.