What will the ATO be targeting come tax time this year?

What will the ATO be targeting come tax time this year?

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?

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    COMMENTS

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    pedro the swift
    21st Mar 2019
    11:00am
    Once again,target the small fish while the big ones get away!
    TREBOR
    21st Mar 2019
    11:18am
    In a way you are correct, since the small fish do not have the ability to shuffle properties and income around and make it disappear - it's like the ATO looking over a small business with electronic cash register and a huge conglomerate... no real comparison in ability to shuffle money around etc.

    Hence my post some weeks or so ago about the need for a full review of company structures, and a close determination of 'family companies', 'trusts', and 1 + 1 companies (where there is one shareholder with 99% of shares - making that person the real and only beneficiary, and one other with 1%). Also under the hammer are serial shelf companies to get into serial house ownership, which each individually apparently suffer an inordinate amount of perpetual loss while reaping often millions in returns for the serial owners.

    I've long been saying that company law and company tax rules need a full overhaul....
    Farside
    21st Mar 2019
    2:41pm
    TREBOR is on the money with "company law and company tax rules need a full overhaul". Until this happens it is a mostly futile exercise to systemically target every size of fish.
    MICK
    21st Mar 2019
    4:40pm
    That's how the system works pedro. The big fish can string out legal proceedings for years whilst us small fry do not have the pockets to do this and we are fair game.
    I have no real problem as I spend days on critiquing my return so that it is squeaky clean. Of course others do not and they may get caught up.....saved a heap of time over the years but now caught? Do it right cowboys.
    TREBOR
    21st Mar 2019
    11:13am
    "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."

    Is there any reason the ATO shouldn't?
    arbee
    21st Mar 2019
    12:22pm
    The way I read the article it would appear that if you have declared all rental income and not claimed spurious deductions then you have nothing to worry about. However those that spend thousands renovating their own homes and claim it against their rental properties had better look out.
    TREBOR
    21st Mar 2019
    2:18pm
    Spot on. Only the cheats need worry.
    TREBOR
    21st Mar 2019
    11:25am
    **falls about laughing**

    "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."

    Kinda puts the 'welfare bludgers and rorters' in the shade, eh?? The Honourable Business Person ... LMAO ....

    "multiple deliberately falsified claims or claims for properties that do not exist."

    What will be their punishment? A criminal record and a severe penalty? Or is that only for the 'scum' at the bottom of the pond and not for The Honourable Business Person??

    Net's closing, people..... if you are a rorter - get your mind right!!
    MICK
    21st Mar 2019
    4:42pm
    "Higher than normal rental deductions" is the key phrase.
    The ATO has software which identifies those who stand put. Same deal for tradies who earn no money but have huge deductions.
    Blend in with the crowd and you'll be right. Lets face it 300 audits is a drop in the bucket and this is just a scare campaign to get people to stop gaming the system. So it should be.
    TREBOR
    21st Mar 2019
    6:02pm
    Yes - my former accountant had it all sewn up - he had inside knowledge of the ATO and their benchmarks - and said that as long as you stayed within their lines they would not look at you.

    Certainly someone with a massive cost of repairs and such would be looked at....

    BTW - my accountant got my Jag and Daimler both covered under running costs, alongside my two commercial vehicles.
    TREBOR
    21st Mar 2019
    6:06pm
    Unless I'm wrong, Mick - that 300 (Spartans?) would be the normal annual number reviewed on a rotating basis. They'd be selected randomly, looked over for 1-3 years and then be replaced by a lottery..... UNLESS they showed up as cheats.

    It's a cunning way of employing fewer and less qualified staff, often part-time at EOFY, and not having to actually process every return.

    I've mentioned it before with regard to large companies and how they 'scape the lash of paying taxes. Same deal - some are reviewed relatively in depth for a couple of years, then go off the system UNLESS caught for cheating - and are replaced by another one for a couple of years.

    Under that system a company could be on the list for one year or three - or NEVER... very few really leave Neverland...
    Sundays
    21st Mar 2019
    11:34am
    If you are deliberately cheating/rorting, you shouldn’t be surprised if they catch up with you.
    Jem
    21st Mar 2019
    11:44am
    They are not only targeting rental owners, they are after retirees who have a working Spouse..I was the target of a spot telephone audit from the ATO checking on my Wife’s income from her part time job, I checked they were definitely from the department, they knew all my details and even enquired about her very nominal $10/$20 expenses that was reimbursed by her Employer that our Accountant had properly stated in her last years returns..Talk about “Big Brother”! They were happy in the end, but certainly scared the bejesus out of me...Not a phone call a 75 year old needs!
    Farside
    21st Mar 2019
    2:50pm
    @Jem, I hope people read your post closely. Working in the black economy and keeping your activities secret from the ATO is only going to get more difficult. Folks would be surprised how much the ATO already knows about our financial circumstances.
    TREBOR
    21st Mar 2019
    6:10pm
    When they can autofill my last two returns for me........... they sure know a lot, Farside...

    I can foresee a time when RICO laws will be in place to catch those serially unemployed who just happen to own a series of houses - met one once - drug dealer - he said he'd get two years...piffle ... while in jail his gang looks after him with money, his girlfriend lives in one house he already owns (at 27) and his mortgage on the second is paid by the gang...

    Never held a job = no reliable source of income - if you are a lifestyle criminal, RICO.....

    Easy as pie but takes balls - something n short supply in governments .....
    Farside
    21st Mar 2019
    7:40pm
    @Trebor, going to jail is not the easy way out if you object to being someone's love interest and not connected to the gangs. Some years ago an acquaintance of a friend thought a five week stint was a good way to settle his fines, go on a diet, get fit etc. After being shared around and regularly beaten for the duration he committed suicide days after his release.

    I am sure RICO charges directed at C-level execs and directors would change some behaviours quick smart.
    Curious
    21st Mar 2019
    11:49am
    I believe the property investment cheaters will not get away easily, cross-checks of computer records will sort them out. The challenge to ATO is the cash economy, which is a bigger fish to fry. If the ATO catches up with this cash economy, our GDP will go up a fair bit. This cash economy is just as bad as the non-tax payment by the big corporate enterprises.
    TREBOR
    21st Mar 2019
    2:23pm
    Hmm - yes - but the cash economy is only one step removed from the taxable economy. the moment cash money is spent, it goes back into the tax cycle.

    What is more concerning is the ability of some to offshore and onshore tax, taking a deduction for doing so, and then re-using it.

    That is why I advocate a minimum tax on any cash offshored - this would also have the signal benefit of catching the Slim Mehajers in the act of transferring millions to Lebanon just before the authorities close in on them. If you are under a cloud, your cash will not be transferred until that cloud is resolved.

    Any transfer over a certain amount should be held for a period of time and checks made on the financial status of the sender or his/her representative. Governments here learned not one thing from Bondan Skase and Skasen Bond.
    Curious
    21st Mar 2019
    3:16pm
    In the first instant, the cash economy deprives the first round of tax revenue. The circulation of the tax revenue is important to the health of the Budget and the cash flow throughout the economy is also important to our GDP.
    MICK
    21st Mar 2019
    4:46pm
    Agreed TREBOR.
    However the tax system should not be OPTIONAL like those at the top think it is. The problem is our governments refuse to end the game and prosecute those who are blatant top end crooks, which leaves average workers to pay these leeches on top of their own dues. This is what is wrong with the system and we need a government with the balls to catch the crooks and strip their assets for their thieving. I'd vote for that!
    TREBOR
    21st Mar 2019
    6:13pm
    Yes - more money is spirited out of the tax cycle by those with the money than those without... I've referred to such investments as - say - a new big swimming pool at your holiday home, or a nice new car or another investment property - as 'dead stock', since they are actually not producing any work thus produce no tax and lie still paying no tax, and sometimes even cost the taxpayer money.

    Great work if you can get it!!

    Jo Bloggs cleaning a house for $50 cash is nothing compared to that kind of thing.
    Farside
    21st Mar 2019
    7:48pm
    the cash economy is not that difficult to crack down upon in a material sense. For many years countries such as Belgium have been doing this using a means test, i.e. does your assessable income correlate to your lifestyle, or estimating a tax amount to be paid. Tracking expenditure is increasingly easy in a digital age. The thing with black money is it can only be spent on incidental activities without drawing attention.
    pedro the swift
    21st Mar 2019
    12:00pm
    The whole issue is very simply fixed. NO DEDUCTIONS OF ANY KIND.No need for tax returns. Get rid of 90% of ATO staff and tax fiddling accountants. Budget will be in surplus straght away!
    Farside
    21st Mar 2019
    2:52pm
    Pedro,have you done the math on this or is it just an uninformed opinion?
    MICK
    21st Mar 2019
    4:49pm
    I presume you are talking GST with the bottom end of society paying exactly the same amount of tax (as a %) as the billionaires? That sort of sounds fake to me....but if you allow some to pay a different amount it won't be long before the rich and their puppets governments allow the wealthy another out.
    Fairness is tough whilst we allow the rich to fund election campaigns and pay for massive promotions for THEIR MAN. Once elected they have their puppet!
    john
    21st Mar 2019
    12:14pm
    Good grief, our investment house was trashed in 2017 , from January until August we had no income from it at all, even though the tennant was in by end of May, so target all they like, I got hardship help from the bank from the North East of the country, which gave me 4 months respite on my payments which then turned my monthly payments to a higher and worse situation that I had been in, no compassion no idea this QLD bank. So we opaid off all the fix up costs the bond did nothing , the dopey agent for some reason gave the wrecking tennant a reference, and since then this Mum and Dad unexpected investor has travelled pretty damned hard right up to now where the rent just misses covering the mortgage on the property, and with water and rates and air con fixes and other costs that never end, NOW the bleeding tax department is going to "check us out"??? Well have your best shot, because right now this property has nearly sent us broke, an d the rents in 17/18 went into the toilet. Now who are the monster investors that need the Tax man checking them, maybe some foreigners ruining the nation putting up prices and also some politicians every one that seems to have investment properties and the unions too, and all sides of politics, take their profits, go for it taxman . But pick your targets fairly.
    TREBOR
    21st Mar 2019
    2:23pm
    Legitimate expenses are not targeted, John.
    TREBOR
    21st Mar 2019
    2:24pm
    At least they're not applying RobberDebt to this ... yet.
    Cowboy Jim
    21st Mar 2019
    12:29pm
    Most pensioners are possibly more concerned about C/Link than the ATO. Extra income from renting rooms etc has always been a bugbear for pensioners with nosey neighbors the dobbers.
    Paddington
    21st Mar 2019
    1:08pm
    Yeah lol! We have our daughter living with us but she is unwell and we are stepping up rather than the other way round. After six months she has a diagnosis. Luckily we are good money managers on the pension and are coping.
    KSS
    21st Mar 2019
    12:33pm
    I don't see what the problem is with the ATO checking investors or work expenses.

    And statements such as this:

    "This puts tens of thousands of retirees firmly in the ATO’s crosshairs" is nothing more than scaremongering. Something this site is well practiced in!

    The upshot is, if you are declaring all income regardless from where it comes, and not trying to claim deductions to which you are not entitled, you have nothing to fear. Get your paperwork in order.
    Farside
    21st Mar 2019
    2:53pm
    +1
    MICK
    21st Mar 2019
    4:51pm
    Correct. They'll only come after the ones the computer model says stands out for whatever reason. Most will hear nothing from the tax office as should be the case.
    Hobbit
    21st Mar 2019
    12:42pm
    It's a matter of priorities. There's far more to be collected from multi-nationals. The ATO needs to man-up and take them on, instead of defenceless individuals and small businesses.
    Farside
    21st Mar 2019
    2:57pm
    it is not a matter of priorities at all, rather it is a matter of capabilities. It is far easier to tackle unsophisticated individuals and small businesses who do not have the means to easily rort the system. The company and tax legislation is so complex and full of loopholes that the ATO will always be behind the multi-nationals until these fundamentals are addressed.
    MICK
    21st Mar 2019
    4:54pm
    That may actually not be the case Hobbit. Remember that there are a handful of multinationals and millions of small investors. The money is in the big numbers but the few at the top should be paying their dues as this is why pensioners are targets to be excluded from a pension and why we have 24,000 young people sleeping rough. We have the money but IT IS NOT BEING COLLECTED! Meanwhile CEOs and Boards live the life of Riley on OUR MONEY.
    Jim
    21st Mar 2019
    12:54pm
    I came across an interesting statistic recently, it was all about tax avoidance, I don’t know if it’s true, and the numbers involved are beyond my understanding, but here goes, Australia’s GDP is 1.6 trillion approx, the report I read indicated that 9.84% of GDP was in the black economy, ie it was unreported for taxation purposes, the areas of concern were in eBay sales and other online sellers, also in the Sunday morning markets that many of us love to go to, the other major concern involved cash in hand jobs, I don’t know how much the top end of town avoid paying their taxes, and I fully agree we should use the full weight of the law and hound these people until they pay the tax that they should pay. Back to the black economy, if the figures are even remotely true then the tax being avoided is in the billions of dollars, I did a quick calculation, and I am not even sure I have done it correctly, I am sure there are plenty out there far smarter than me, but my calculation was, 1.6 trillion, 9.84% = 157.44 billion this is the unreported income that is avoiding tax, could this be correct? If so how much good could come from collecting the tax due? Add that to the tax already being avoided and we solve all our countries problems, or is that just a pipe dream.
    KSS
    21st Mar 2019
    1:07pm
    Funny, I just bought something from eBay this morning. The goods cost $50, postage $29 from India, and then $7.90 GST - Yes GST on postage!

    The GST bit was taken separately by PayPal rather than the seller. So that would indicate that the ATO will be collecting more tax. Of course it is not as much as they would have got had I bought the item in Australia from a shop but then why would you pay between 5 and ten times the amount of the original item (which they probably get cheaper than I did given they would have wholesale prices as well)?

    In case you are wondering, I bought a handmade leather overnight bag. Similar styles here cost between $250 and $600 depending on whose brand name goes on it.
    Jim
    21st Mar 2019
    2:00pm
    It’s seems as though the pressure being put on online sellers like eBay might be working, I agree things can be bought online much cheaper, I try to buy locally if I can, but I have just paid the price, I was looking for a blower belt replacement for my Simpson clothes dryer, online they were between $2.40 and 3.95 with postage of $2.50, I went to my local small appliance stockist, walked away with a bill of $26.00 inc gst, it’s hard to buy local sometimes, looking at the belt it’s probably worth about a $1.50.
    TREBOR
    21st Mar 2019
    2:25pm
    A Postage From India.. hmmmmm
    Jim
    21st Mar 2019
    2:34pm
    No actually it was from padstow, usually if it comes from China or India the postage is free, I don’t know how they can still make a quid.
    KSS
    21st Mar 2019
    4:21pm
    Put a sock in it TREBOR. Your insinuated imaginings are wildly off course as usual.

    I just came back from India and know who I am dealing with!
    MICK
    21st Mar 2019
    4:56pm
    I agree with you TREBOR. Postage from China is always free and I seem to recall India is the same. I was told that an international treaty existed for this to happen but cannot say I know if this is fact or fiction.
    TREBOR
    21st Mar 2019
    5:59pm
    Jeez, KSS - what brought that on? A little joke with Jim who's come across as a nice and thoughtful bloke - and you imagine all kinds of deep and dark undercurrents.....

    I get stuff from China free postage and such ... no big deal...

    For the uninitiated - it was a bit of a play on 'A Passage To India'.... no big deal - unless you are paranoid etc.....
    TREBOR
    21st Mar 2019
    6:32pm
    Watchu' got to hide, Willis?
    Andy Leucite
    21st Mar 2019
    1:38pm
    I'm not sure 'targeting' is the appropriate word, given that is implies aiming with some precision. I suspect that like recent catch-all and scare-all blitzes by Government departments, the campaign is using the shotgun approach rather than putting a probable feral quarry under the crosshairs of the telescopic sight. My wife and I are both old-age part-pensioners and a few months ago received an intimidating letter from Centrelink demanding that we report our income from Airbnb, and failure to respond within about a week and half (the letter was dated one and half weeks prior to our receiving it, and required a response within three weeks of that date), would result in immediate loss of pensions. The main problem was that we have never ever rented anything out, much less via the Airbnb umbrella. As usual rising Centrelink seemed impossible because no one picked up the phone. Visiting an actual Centrelink office was not all that satisfactory either because the human person there couldn't contact or find the person who supposedly generated the letter. We were told to just ignore it all, and to put in a complaint if our pension was cancelled. At the time I wondered if there wasn't a bigger picture - perhaps involving the ATO. I still wonder. The coincidence looks more intriguing with your article today about the ATO's targeting.
    KSS
    21st Mar 2019
    1:50pm
    So why did you not simply respond to the letter with one of your own - perhaps with a statutory declaration that you have never offered rentals through airbnb and sent it back? Copies for your files of course.
    Hball
    21st Mar 2019
    2:33pm
    Why not collect tax from the multinational companies such as IKEA and the Petroleum companies then have a look at the non charity components of our religious organisations. They are all reaping millions but appear to be doing so with the governments blessing.
    Farside
    21st Mar 2019
    3:02pm
    taxing multinationals is easier said than done when the ATO is so hamstrung in tackling transfer pricing and financing
    MD
    21st Mar 2019
    4:26pm
    Also add Unions to the list Hball. Do political parties pay tax ?
    MICK
    21st Mar 2019
    5:00pm
    The problem with transfer pricing is a political one. This is well recognised by multinationals and I recall a senate enquiry where Pharmaceutical companies were hauled in. One CEO said, like all companies which rort the system do, "we pay everything required by law". He was putting it up to the government. The CEO went on the say "if you don't like it then change the laws". THEY NEVER DID!!!!

    For the record 'transfer pricing' is nothing more than EXPORTING PROFITS. Please tell me that is anything other than 100% crooked! If you or tried that on we'd be in court feeling the full weight of the law, whatever that is these days as there are laws for average citizens and completely DIFFERENT laws for the wealthy. Don't get me going!
    Cowboy Jim
    21st Mar 2019
    6:07pm
    Mick - we can never do anything like that as individuals, we have only one domicile, the others have several. We are not even allowed to have a bank account in a place we do not live. The BIG boys are just treated differently.
    I wanted to keep a small bank account alive overseas while my mother was still with us. Not allowed any longer. Mum died last month and now I have to deal with all the costs from here like my sisters paying for everything and I will send them an overseas draft at the end of all the proceedings. Little guys do not count.
    TREBOR
    22nd Mar 2019
    9:46am
    Just a small part of the developing totalitarian state, Cowboy Jim .... nothing to worry about.. once the individual has all rights removed, there will be no complaints about rights any more.... nothing to discuss.
    SuziJ
    22nd Mar 2019
    9:36am
    Not me (smiling as I write) - I don't have any savings let alone a property to rent.
    Cowboy Jim
    22nd Mar 2019
    9:56am
    And I am sure you are very proud of that. We should all follow your example.
    vincent
    22nd Mar 2019
    12:05pm
    Cowboy Jim. Where did you get that from that you are not allowed to have an overseas bankaccount. If you are with centrelink just give them the details and the balance.
    Absolutely no problems whatsoever. I receive my part pension from overseas in a bankaccount in that particular country.
    vincent
    22nd Mar 2019
    12:05pm
    Cowboy Jim. Where did you get that from that you are not allowed to have an overseas bankaccount. If you are with centrelink just give them the details and the balance.
    Absolutely no problems whatsoever. I receive my part pension from overseas in a bankaccount in that particular country.
    Cowboy Jim
    23rd Mar 2019
    8:39am
    Well, vincent, it is not Centrelink that stopped me having the account. It is the country not allowing me to have one. When the U.S. pressure was on the banks decided not to have non resident accounts any longer and I was told to close it forthwith.
    Could be that I could have one in another overseas jurisdiction but wanted one where my aged mother was living. My part pension from that country is now sent to me directly from there to my Aussie bank account. I know that the UK and Ireland have no problems with overseas accounts.
    ardnher
    22nd Mar 2019
    12:14pm
    as I will be a taxpayer from 15 to the grave I have no problem with any audit of my affairs and why should anyone who is doing nothing wrong? I don't get why people get up in arms over this.
    anonysubscribe
    24th Mar 2019
    3:26pm
    good to go after the trees and get lost in the woods of public policy exclusions for businesses big and small from paying their fair share. this government needs to reform tax law and aim its big guns against the big end of town instead of persecuting the small time evaders who jumped on the same boat without the backing of the political lackeys who pander to the fat cats.
    Farside
    25th Mar 2019
    10:10am
    no argument from me that "government needs to reform tax law and aim its big guns against the big end of town" however that is not a good reason for not prosecuting "small time evaders who jumped on the same boat". Tax rorts at every scale should be targetted and vigorously prosecuted to make it clear this behaviour is not acceptable full stop.


    Tags: tax, money, finance, ato, housing,