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

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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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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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61 Comments

Total Comments: 61
  1. 0
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    Once again,target the small fish while the big ones get away!

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      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….

    • 0
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      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.

    • 0
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      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.

  2. 0
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    “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?

    • 0
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      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.

    • 0
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      Spot on. Only the cheats need worry.

  3. 0
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    **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!!

    • 0
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      “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.

    • 0
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      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.

    • 0
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      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…

  4. 0
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    If you are deliberately cheating/rorting, you shouldn’t be surprised if they catch up with you.

  5. 0
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    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!

    • 0
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      @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.

    • 0
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      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 …..

    • 0
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      @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.

  6. 0
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    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.

    • 0
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      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.

    • 0
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      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.

    • 0
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      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!

    • 0
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      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.

    • 0
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      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.

  7. 0
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    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!

    • 0
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      Pedro,have you done the math on this or is it just an uninformed opinion?

    • 0
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      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!

  8. 0
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    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.

  9. 0
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    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.

    • 0
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      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.

  10. 0
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    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.

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