What will the ATO be targeting come tax time this year?
The Australian Taxation Office (ATO) will be targeting taxpayers who own rental properties or who have earnt casual income from Airbnb rentals in 2018-19.
The office will also be increasing its ability to data match records between real estate agents, property managers and tax professionals in a bid to recoup overclaims and money from those who haven’t declared income related to rental properties.
This puts tens of thousands of retirees firmly in the ATO’s crosshairs.
According to an Australian Housing and Urban Research Institute’s (AHURI) report, 30 per cent of older Australians retired with a second property by 2014, growing from 25 per cent in 2002. The proportion of retirement wealth derived from investment properties grew from nine per cent to 15 per cent over the same period.
The ATO has already audited 4500 problematic taxpayers relating to their 2017-2018 returns for rental properties.
ATO assistant commissioner Adam Kendrick said around 85 per cent of about 2.2 million annual tax returns relating to rental properties were lodged through a tax agent. The office plans to work with tax professionals to make more taxpayers aware of potential errors.
“In the past we have not had a really big presence around rentals, but we are really ramping it up now,” said Mr Kendrick.
Anyone taking advantage of Australia’s negative gearing laws will be in the ATO’s crosshairs, especially those who have overclaimed deductions or have not declared income at all.
This includes those who have derived occasional income earned through sharing economy platforms such as Airbnb.
The ATO is currently working with state revenue agencies, the real estate sector and sharing economy platforms to get a better indication of how much money the tax office is forgoing.
It has also asked the Real Estate Institute to hand over property management reports prepared by real estate agents for individuals who rent out their property.
These reports typically include details about council rates, management fees and other costs that could be claimed in tax returns.
When examining 2016-2017 returns, the ATO carried out 300 randomly selected audits, as well as 2500 targeted audits of taxpayers with higher-than-normal rental deductions which revealed multiple deliberately falsified claims or claims for properties that do not exist.
These efforts resulted in $12 million of extra revenue from adjusted tax returns.
Work-related expense claims will also be targeted in an attempt to shore up potential revenue leakage from the $22 billion in deductions claimed for work-related expenses each year.
According to ABC News, the ATO’s theoretical tax gap for individuals is $8.7 billion and the ATO estimates about $3.5 billion of that is related to work-related expense deductions.
And around 500 “reckless” tax agents representing about 1 million clients will be audited. About 150 of these tax agents are already “under active management”.
“That means we take a pretty intensive look at not just their clients, but their [agent’s] own personal [tax] affairs,” said Mr Kendrick.
Do you have a rental property? Are you sure you’re not overclaiming? Will these ATO targets affect you?