They’re getting better, the ATO. Better at knowing exactly what you’re up to.
And the leaps in data matching will only accelerate when that pesky AI thing really hits its stride.
Under Australia’s self assessment system, the ATO charitably assumes the information you give them is correct and they will only question it if they think there is something that doesn’t quite add up.
So you or your accountant do your tax return and send it off and cross your fingers that nothing in there will raise an eyebrow and a few weeks later the ATO will pop a refund into your bank account and say, ‘There you go. See you next year.’
But what if the figures you put in your return don’t match what the ATO already knows about you? And exactly what do they already know? A lot.
The time is fast approaching when ‘self assessment’ will be a bit of folklore, something we look back on fondly, because the ATO will already know what refund you are entitled to before you submit your return. Maybe they’ll be telling you what they are prepared to give you back and you’ll have to then argue your case if you think they are being a bit stingy.
So what do they know already?
Your salary, of course, and how much tax you have paid. Most employers report that. Bank interest? Yep. Most companies report dividend information to the ATO.
But what about property specific data?
Key points:
- Short term rental platforms, like Airbnb, report payments made to property owners. That comes as a bit of a surprise to some people.
- Data matching from property managers is something the ATO has turned its attention to more recently. They’ll be tapping into a rich vein there.
- Property manager data will also inadvertently help the ATO to identify improvements incorrectly claimed as repairs.
- The states are getting in on the action, too, and auditing first home owner grants to claw back some money there.
Do you have a new property you need us to look at? Book online or call our friendly team on 1300660033 for a chat about your property.
Short term rental platforms report payments made to property owners
Owners of properties listed on Airbnb were notified a couple of years ago that that income data was being passed onto the ATO. Presumably Stayz and other smaller platforms do likewise. We have written about this here previously.
Often the rentals in question were granny flats or rooms in houses where the rent had always been paid in cash and flew under the radar.
Even on Airbnb etc, for a long time money was put into nominated bank accountants and it was up to the owners of those accounts to flag that income with the ATO. It was a bit surprising, to be honest, that it took the ATO so long to get tough on that.
Now at the end of every financial year, managers of short stay websites tell the ATO exactly what they have paid the owners of the properties on their platform over that financial year. It can come as bit of a surprise to those owners when they realise that the ATO already know how much they have earned from their property.
And now that the ATO knows about the rental income, those owners open themselves up to CGT problems down the track when that property is sold. We have also written at length about that here previously.
The ATO has turned its attention to matching information from property management data
The ATO recently promoted their data matching foray here into the world of property managers as being about compliance and education.
When it comes to the education bit, the underlying tone to property owners is, ‘Right, we’re going to teach you lot a lesson.’
Sample audits a couple of years ago indicated that unreported rental income was over one billion dollars per year. Surprise, surprise. So we’re not talking about small change.
So how are they doing it?
The ATO are not contacting individual property managers and asking them to hand over landlord data. Imagine how convoluted that would be.
No, they are going over the heads of agents and straight to the providers of the major software platforms used by agents and getting the data direct from them. You can read more on this here.
Is that a collective, ‘gulp’, we hear?
And they are planning to go back some years because, well, they can. No point just looking forward when they can go back in time and claw back goodness knows how much.
And it’s not just undeclared rent the ATO will be looking for. There will be CGT debts ‘overlooked’ by taxpayers, improvements incorrectly claimed as repairs and goodness what else.
Data matching will help the ATO identify landlords incorrectly claiming improvements as repairs
Of course, the ATO have been onto the incorrect claiming of improvements as repairs for some years and they flag it every year as something on their watchlist. We have written about this before often, most recently here.
You know how it goes. Work that really should be claimed at 2.5% per year over 40 years. Followed by internal repairs to woodwork and walls. Roof work is common, too.
Who could blame anyone for wanting to claim back their expenditure immediately as opposed to having it drip fed over the next 40 years – some of us won’t even be around that long.
So what prompts the ATO to query a repair claim? The amount, certainly. A big repair claim will get noticed for sure. But also the timing. If you have only been renting a property out for, say, a year and put through a big repair claim, the ATO will be onto you in a flash.
Because in putting through that large claim, you are saying that you needed to spend that much money to rectify the damage done while YOU were renting out the property.
The ATO are going to want you to prove that the damage was not there when you started to rent out the property. If you can’t prove that, you’ll be clawing that money back for 40 long years.
First home owner grant recipients, the states (and the ATO) could be watching you!
Auditing first home owner grants is also a simple exercise and one that the states use to claw back a bit of money. They do this through data matching and mining. NSW also has an Anonymous Tipoffs Hotline, so you can bet the other states would, too.
The states firstly claw back the grant and concessions on stamp duty given erroneously to people.
Then they roll up their sleeves and get serious with prosecutions and fines.
And of course the states would also share news of their good fortune with the ATO.
Many of the people rorting the grants would be renting out their properties and possibly not declaring the income in an effort to fly under the radar. That’s what the ATO would be interested in.
People who use property managers and fail to declare income are easy for the ATO to catch when the ATO accesses data from the software providers used by property managers.
But it’s not much of a stretch for them to also notice regular and unexplained deposits into a bank account from a third party.
So in short, you can run from the ATO, but you can’t hide.
Do you have a residential or commercial property you would like us to help you claim depreciation for? Or a question about depreciation? Order online now or call us on 1300 660 033 and rely on our 20-plus years of experience in estimating depreciation returns.
