Rental property owners subject to ATO data matching
In order to close the tax gap of individual taxpayers, the ATO is cracking down on rental property owners with the commencement of two data matching programs to collect property management data and rental bond data. The programs will complement each other and collect the personal information of more than 1.6 million property owners. The data, such as detailed information on the dwelling (i.e. the number of bedrooms etc.), commencement and expiration of leases as well as the amount of bond held will be used for compliance activities in relation to income tax and CGT.
Data matching programs - property management & rental bond data
Rental property owners beware, the ATO has commenced 2 data matching programs designed to obtain a myriad of information to ensure that various income tax reporting obligations have been met. Specifically, the ATO will run a new data matching program to collect property management data for the 2018-19 to 2022-23 financial years and extend the existing rental bond data matching program through to 30 June 2023.
The justification used by the ATO for targeting rental property owners is that each year it conducts a review of a random sample of tax returns to calculate the difference between the tax collected and the tax that should’ve been collected (i.e. the tax gap). For the 2017-18 year, it estimated a net tax gap of 5.6% or $8.3 billion for individuals with rentals making up 18% of this net tax gap. As a comparison, the net tax gap for high wealth groups is 7.4%, for medium businesses it is 6.2% and for medium businesses it is 11.5%.
Rental bond data to be collected
The information obtained under the two programs will include property owner identification details, including unique ID, individual/non-individual names, addresses (residential and postal), email addresses, contact numbers, BSB number, bank account number, bank account name, and business contact names and ABN if applicable.
Rental property details obtained under the two programs will include address, date property first available for rent, period of lease, commencement and expiration of lease, amount of rental bond held, number of weeks the rental bond is for, amount of rent payable for each period, period of rental payments (i.e. weekly, fortnightly, or monthly), type of dwelling, number of bedrooms, rental income category, rental income amount, rental expense category, rental expense amount, and net rent amount.
Property management data to be collected
In addition to the above, the programs will also obtain details of the property managers involved, including business name, managing agent full name, business addresses (including internet addresses), email, contact numbers, ABN and licence number. As can be seen, the amount of information to be collected by the ATO is extensive and detailed which will enable it to perform detailed analytics for its compliance programs.
The rental bond data will be acquired from State and Territory rental bond regulators on a bi-annual basis, and the property management data will be acquired from property management software providers.
How much data is being collected?
It is expected that records relating to around 1.6 million individuals will be obtained each financial year in relation to the property management program and records of an estimated 350,000 individuals will be obtained under the rental bond program. Due to the nature of the data collected however, there will be some overlap in the number of individuals captured.
What will the data be used for?
The ATO will be using the vast amounts of data collected to ensure that taxpayers that own income producing property are meeting their obligations to report the correct amount of income in their tax returns. It will also be used to identify taxpayers disposing of income producing properties which will trigger a CGT event. The ATO notes that it will use historical rental bond data to support CGT cost base calculations if necessary.
Period of review
Further, the ATO notes that while the data collected from the programs will be retained for 7 years from the receipt of the final instalment of verified data from data providers, its general compliance approach will align with the standard period of review (commonly 2 years for individuals and small businesses) and record keeping (usually 5 years). However, note that in cases of fraud of evasion, there is no time limit for amending an assessment.
Are you at risk?
If you’re not sure whether you’ve included the right amount of rental income in your tax return or whether you’ve worked out the CGT correctly, and you think you could be at risk of being audited, we can help you to get on the front foot with the ATO.
Contact us today for help.