The Australian Taxation Office or ATO, issues notice to property investors. It will scrutinize their tax returns in an effort to claw back an estimated $1.3 billion in missing taxes.
In a 2020-21 sample audit conducted by ATO, an estimated $9bn of tax revenue was lost due to errors and tax avoidance.
According to the ATO, the most common tax errors that property investors make are:
- incorrectly declaring improvements to be repairs rather than capital works
- not apportioning expenses for the private use of the property
- either not apportioning or incorrectly apportioning the loan interest costs after refinancing for private purposes
The ATO told The Guardian that it would use “formal information gathering powers” to compel 17 financial institutions – including all the big four banks – Commonwealth, Westpac, NAB, and ANZ – to provide data on approximately 1.7 million property investors.
ATO will gather the following information from the basks:
- Client’s names, addresses, phone numbers, and dates of birth
- Account numbers and balances with transaction information
- Information about the rental properties
That would allow the ATO to assess all the income an investor had earned and all the expenses they’d incurred over the course of a year. It will then compare that with their tax return.
ATO then issues a 28-day notice to the property investors once it has obtained the information from the financial institutions. This will provide property investors ample time to respond or dispute the information to ATO.
ATO said, “Our data-matching programs help us fulfill our responsibility to protect public revenue and maintain community confidence in the integrity of the tax and superannuation systems,”
That’s why it’s generally a good idea for property investors to get professional help when filing tax returns. Reach out to us if you’d like to be introduced to a trusted accountant. We will be more than happy to recommend someone.