The Australian Taxation Office (ATO) is launching an extensive data-matching program to identify taxpayers receiving income from short term rentals. Information from online platform sharing sites for around 190,000 Australians will be examined to identify taxpayers who have left out rental income and over-claimed deductions.
In 2016, approximately 2.1 million individuals reported rental income of $42 billion. Assistant Commissioner Kath Anderson said that rental properties are high on the ATO’s priority list given that the rental market is a significant share of the economy and there is evidence that some taxpayers are getting it wrong.
“The availability of short stay rentals has exploded thanks to the online revolution. With the growing number of homes, apartments, units and rooms available via accommodation sharing sites, there is a real risk some people may not understand their tax obligations,” Ms Anderson said.
The ATO will match data provided by online rental platforms and their financial institutions against ATO records to identify taxpayers not meeting their registration, reporting, lodgement, or payment obligations when renting out property on a short term basis. The new data complements long-term rentals information which the ATO already receives from State and Territory Bond Boards.
The data collected will include income received per listing as well as listing dates, enquiry and booking rates, prices charged or quoted per night and other information.
“We are increasingly using data and technology, to identify any missing income in your tax returns. This data will also identify taxpayers who use sharing economy rental platforms to list a property that is not genuinely available for rent in order to claim unwarranted deductions. There is no high-tech hideaway for rental income.
“The ATO often allows taxpayers who have made genuine errors to amend their returns without penalty. But deliberate attempts to avoid tax on rental income could see the ATO take action.”
There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.
First, make sure you declare all your income. While the sharing economy has changed the way we do business, it hasn’t changed the ATO’s definition of income. Any income from renting all or part of a house or unit needs to be declared, even if it is just a one-off. There is no such thing as a rental “hobby”.
Secondly, only claim deductions for the periods your property is rented out or is genuinely available for rent. And if you are renting part or all of your main residence, you can only claim deductions for the time it was actually rented. If a property is rented out below market rates, for example to family or friends, deduction claims are limited to the amount of income earned.
Remember, costs to repair damage, defects or deterioration existing on purchase, or renovation costs, can’t be claimed as an immediate deduction. These costs are deductible over a number of years.
Finally, it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.
Taxpayers or tax agents that have made an error or omission should contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where we are contacted prior to an audit. Maximum penalties can be as high as 75% of the tax shortfall.
Taxpayers contacted by the ATO will be given the opportunity to verify information collected from data providers before any compliance action is undertaken and will be given at least 28 days to clarify any information obtained.
Details of the ATO’s data matching strategies are published at www.ato.gov.au/datamatching —