ATO’s fresh tax focus on property investor deductions and income

Aug 02, 2021

The Australian Taxation Office is widening its net to catch property investors who cheat on their tax returns.

With tax time in full swing, the ATO’s data collection program has been expanded to include property management firms, which will give it more transaction information about 1.6 million real estate investors who use property managers.

ATO assistant commissioner Tim Loh said 70 per cent of the 2019-20 property investor tax returns it selected to review had to be adjusted, and “on average the correction was about $4500 for each return”.

“Some people are making genuine mistakes but there’s also people who are deliberately doing the wrong thing,” he said.

“Don’t try and take the mickey out of the tax system.”

The ATO’s data matching and “nearest neighbour” technology examines investors’ tax claims, often in real time before they lodge their return, and spots deductions or income that seem unusual compared with a typical claim.

“Every return is scanned,” Mr Loh said.

He said the ATO’s use of property management firm data complemented its existing third-party data sharing arrangements with rental bond authorities and accommodation sharing platforms such as Airbnb.

“We are expanding the rental income data we receive directly from third party sources.

“We are getting information in relation to under-reporting of rental income and overclaiming of property management fees.”

The most common mistake made by rental property and holiday homeowners was neglecting to declare all their income, including capital gains when selling a property, Mr Loh said.

Chartered accountant and Mr Taxman founder Adrian Raftery said the ATO sourced an “insane” amount of data from third parties using technology and data scientists.

“They collect information about what you bought a property for,” he said.

This enables checks on whether investors are claiming too much interest, as well as matching it with sales data to determine if capital gains are claimed correctly.

Dr Raftery said many property investors chased negative gearing tax deductions, where expenses exceeded income and could deliver large tax time windfalls.

“It’s a legitimate tax strategy and you can get big refunds, but don’t go over the boundary,” he said.

Dr Raftery said investors should read through the ATO’s rental properties guide for more information.

Sometimes dodgy claims elsewhere in a tax return can attract the ATO’s interest in property investors. In July a Queensland sales manager received a criminal conviction and was instructed to pay $29,654 in court orders after her fake work trip claim led the ATO to investigate her real estate dealings and find she failed to declare $39,600 of rental income.

“Where there’s smoke there’s fire,” the ATO’s Mr Loh said.

He said property investors should also examine the ATO’s online investor’s toolkit and depreciation and capital allowances tool.

Original article published here by The Cairns Post on 2 August 2021.

 

 

 

Tags: BorrowingCGTDeductionsPersonal taxProperty

Author: Anthony Keane

comments-rhsLatest Comments

  • "Yes you show the km allowance as taxable income and then you can also make a claim for your car travel. Under the cents per kilometre method you are limited to the first 5000km. So if you get..."

    By: Mr Taxman at Jun 04, 2025 11:57PM

    Post: Claiming car expenses

  • "No would not be able to claim the Uber home nor to the station the next day. The trip to the off-sit meeting would be claimable."

    By: Mr Taxman at Jun 04, 2025 11:55PM

    Post: Claiming car expenses

  • "Depends on your finance type ... if you takeout a lease then the lease payment forms part of your costs (but no depreciation can be claimed) ... if you takeout a Hire Purchase or a Loan then only the..."

    By: Mr Taxman at Jun 04, 2025 11:54PM

    Post: Claiming car expenses

  • "The cost of the trailer itself could be depreciated - usually over 8 years. Assuming no personal usage with it then 100% of that depreciation plus annual rego could be claimed."

    By: Mr Taxman at Jun 04, 2025 11:50PM

    Post: Claiming car expenses

  • "That would be a non-deductible trip unfortunately Erin"

    By: Mr Taxman at Jun 04, 2025 11:48PM

    Post: Claiming car expenses