ATO widens data-matching capabilities to include rental property investors

ATO says 9 out of 10 rental property owners make errors in their returns. So ATO will now obtain information from your property managers, landlord insurance providers, financial institutions, and sharing economy providers like Airbnb, and match it with data in your tax return.  


What is ATO’s data-matching process?

The ATO collects vast amounts of data from sources such as banks, financial institutions, government agencies like State Revenue Office (SRO), Motorvehicle registries, online selling and sharing economy platforms like Amazon, Ebay, Uber, and Airbnb, insurance companies, and many other third-party providers. The type of data collected from third-party sources includes, other than your personal information, income, expenses, assets, investments, and transactions. The ATO then cross-references this data with the information you reported in your tax returns.

The purpose of data matching is to identify any discrepancies or inconsistencies in the information you reported in your tax return. By analyzing the data, the ATO can identify instances where income has been omitted, deductions have been inflated, or other irregularities have occurred.

Assistant Commissioner Tim Loh emphasized that the ATO's data-matching initiatives are not a guessing game but rather a systematic approach to identify taxpayers with incorrect information in their tax returns. The ATO will use this information to educate taxpayers and also plans to pre-fill more data in your tax returns in future years.


What’s new in 2023

The ATO will now collect data from several sources about rental properties and has introduced some new data-matching protocols. The new expanded data sources will include information from property managers, landlord insurance providers, banks and financial institutions, and online platforms such as Airbnb.

The ATO’s data analysis from income tax returns has revealed that approximately 9 out of 10 rental property owners make errors in their returns. To address this issue,the ATO has introduced two new data-matching protocols specifically targeting rental investors.

Investment Loan Data

The ATO has identified that many taxpayers claim interest deductions on their investment property loans but fail to meet the eligibility criteria. For instance, refinancing a property to fund personal expenses and still claiming the interest as a tax deduction is not allowed. It is important for property investors to accurately track and report their loan-related expenses to avoid incorrect claims.

ATO’s findings from the 2020 year reported $1 billion net tax gap commonly due to incorrect deduction of interest on loans where the loan was refinanced or redrawn for private purposes.


Landlord Insurance Policy Information

The ATO now has access to data related to landlord insurance policies. Property investors should be aware that in addtion to insurance premiums paid for rental properties being eligible to claim as a tax deduction, any insurance payouts received regarding an investment property must be reported as income.


What you need to do

If you are aproperty investor, to ensure you are not flagged in the ATO’s data matching process you must take the following steps:

Maintain accurate records

Keep detailed and organized records of all income and expenses related to yourrental property. This includes rental income, repairs and maintenance costs, insurance premiums, interest on loans, and any other relevant financial transactions.


Report all income

It is crucial to report all rental income received from your property, including income from short-term rentals or sharing economy platforms. Ensure that you accurately disclose the full amount of rental income in your tax return.


Claim deductions correctly

Take care when claiming deductions to ensure they are legitimate and comply with the tax laws. Keep records and receipts to substantiate your deductions, such as repairs, property management fees, council rates, and insurance premiums. Additionally, maintain sufficient evidence of the nexus between the expense incurred and the rental property.


Seek professional advice

Consider engaging a qualified tax agent or accountant. They can provide guidance on tax obligations, help maximise deductions within legal boundaries, and ensure compliance with the ATO's requirements.


Stay informed

Keep up-to-date with changes in tax laws and regulations relevant to property investments. The ATO regularly updates its guidelines and provides resources for taxpayers. Stay informed about any updates or changes that may impact your tax obligations as a property investor.


Use software to track and maintain accurate records

Utilise reliable software, such as Myaccountant, to accurately track income, expenses,and deductions. This can help streamline record-keeping, reduce errors, and facilitate easier reporting during tax time.


Voluntary disclosure

Review your financial records and tax returns to ensure accuracy. If you identify any errors or inconsistencies, take immediate steps to rectify them by lodging an amended tax return if necessary.


By following these best practices, you can reduce the risk of being caught in the ATO's data-matching process.

As aproperty investor, it is crucial to understand the implications of these changes and ensure compliance with tax regulations. By working closely with your tax agent and providing accurate information, you can navigate these data-matching initiatives with confidence.


Leveraging Myaccountant for Effective Property Accounting

To effectively manage the risks associated with the ATO's data-matching expansion, consider leveraging Myaccountant's property accounting feature. With Myaccountant you can streamline your rental property portfolio management, gain valuable insights, and maximise your returns. Myaccountant will connect with your bank accounts and home loans to automatically track your rental property income and expenses. You can upload expense receipts and attach them directly to the expense transaction, ensuring that you claim all the eligible deductions, plus generate tax-ready reports for seamless tax preparation.