In a bid to crack down on tax evasion, the Australian Taxation Office (ATO) has announced the expansion of its data-matching capability to ensure taxpayers accurately report their income and deductions during this tax season.
The ATO will now receive new data from property managers, landlord insurance providers, financial institutions offering loans for residential investment properties, sharing economy platforms, and income protection policy providers.
According to ATO Assistant Commissioner Tim Loh, the implementation of sophisticated data-matching programs eliminates the need for guesswork.
“This isn’t a game of Guess Who, as our sophisticated data-matching programs provide us with all the clues we need to track down taxpayers with incorrect information in their tax return,” Loh said, adding that the collected information will be utilized to identify and educate taxpayers who have made erroneous claims in their returns.
One area of focus for the ATO is rental property owners, as their review of income tax returns reveals that 90% of them are inaccurately reporting their returns. Loh confirmed that two new data-matching protocols will be introduced this year for rental investors, covering investment loan data and landlord insurance policy information.
“Around 80% of taxpayers with rental income claimed a deduction for interest on their loan, and this is where we’re seeing mistakes. For example, you can’t refinance an investment property to buy personal items, like a holiday to Europe or a Tesla, then continue to claim the interest expenses as a tax deduction,” Loh explained.
The ATO’s new landlord insurance data-matching protocol serves as a reminder that insurance premiums paid for rental properties can be claimed as a tax deduction, while any insurance payouts received related to an investment property must be reported as income.
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With regards to reporting income from multiple jobs or sharing economy activities, the ATO will be implementing the Sharing Economy Reporting Regime (SERR) starting from July 1, 2023. The SERR mandates electronic distribution platforms that provide taxi services, ride-sourcing, and short-term accommodations to report income data from that date.
All other electronic distribution platforms will be required to report from July 1, 2024. This move aims to provide ATO with greater visibility over individuals earning income through such platforms.
“While the ATO has received data from a number of digital platforms in the past, this legislative change means more platforms will be required to regularly report into the future. These new rules will give the ATO clear visibility of people who are earning income using these platforms,” Loh said.
Furthermore, the ATO has introduced a new income protection data-matching protocol, which includes tracking premiums paid for income protection insurance policies as well as payouts received.
While taxpayers can generally claim a deduction for income protection insurance they purchase, deductions cannot be claimed if the insurance policy is paid by their superannuation fund. In the event of an income protection insurance payout, whether from personal insurance or a superannuation fund policy, taxpayers are advised to include the income in their tax return.
The ATO’s intensified efforts aim to ensure a level playing field for all taxpayers while protecting those who accurately comply with tax regulations.
“We are here to help people get their tax return right the first time, but our message is clear – we’re not playing Guess Who with tax returns this year,” Loh concluded.