How the ATO data-matching program expansion impacts you
Last year, the ATOs announced it was investigating landlords through its data-matching program for the 2021-22 to 2025-26 financial years.
In a recent notice to tax professionals, the ATO said the property management data matching protocol has recently been extended; software providers are now required to give details of rent and expenses for residential rental properties managed by a property manager.
This information, together with rental data from banks, landlord insurers, rental bond authorities and sharing economy providers gives the ATO a deeper insight to common investment property mistakes.
Recent results from property data matching found the following common errors:
- instead of reporting gross rental income and claiming expenses, net rent (after expenses) is reported and the same expenses are claimed a second time
- properties are being omitted from returns
- where they are owned by multiple stakeholders, only one owner reports the property – when both are required to report
- not reporting the rental income received when purchasing an already tenanted property that the new owner intends on moving in to
- capital works or depreciating assets being claimed as repairs and maintenance.
Implications for landlords
The expansion of the data-matching program has significant implications for existing and prospective landlords, for both residential and commercial properties:
- Increased Compliance Requirements
Landlords are now more than ever required to maintain accurate records of rental income and expenses; ensuring compliance is critical to avoid penalties.
- Risk of Audits
With sophisticated data analytics at the ATO’s disposal, the likelihood of being audited increases. Landlords may face scrutiny, particularly if their reported income diverges significantly from data reported by rental platforms or property managers.
- Changes in Tax Deductions
Many landlords rely on tax deductions for expenses associated with property management. The ATO’s increased oversight might lead to stricter guidelines on what can be deducted, potentially impacting the profitability of rental investments.
More information about the Property management data-matching program protocol here.
As the ATO continues to ramp up its scrutiny, it is imperative landlords maintain diligent records and staying informed about compliance requirements.
Importance of financial specialists
The ATO does have a Tax time toolkit for investors on its website, however, we suggest using a property financial specialist (your accountant or financial advisor). A good specialist will know exactly what you can and can’t claim for, what is or isn’t a capital works deduction, and will ensure you’re not claiming for anything you shouldn’t be.
Property tax law is subject to change, and an expert will be on top of all the latest legislation.
Of course, paying for their services is a tax-deductible expense!
Added benefits of a property manager
We know we’re biased but employing a good property manager can really help; in addition to saving your time by managing your investment property, and giving you peace of mind you are operating within the law, they can really help when it comes to preparing your tax return.
As well as finding a tenant, handling your maintenance and ensuring your property is compliant with the latest legislation, we also manage and correctly record the financial outgoings and rental income paperwork. We send a copy of this to you at the end of each month, and also a final one at year-end to give to your accountant.
Furthermore, you can view this, and lots of other information such as current and past repairs and routine inspections, at any time through our dedicated online owner’s portal.
With many of our team having investment properties themselves, we are always exchanging ideas and coming up with solutions.
If you want to know more about our property management services or investing in property, get in touch. Our motto is very simple – we treat every property as if it’s one of our own, and we’ve helped thousands of people realise their financial goals through property.
Our aim is to make your life easier and your property experience exceptional. Simply give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat.
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