The Australian Taxation Office (ATO) has given notice to investors this week of their current activities in data matching from external sources to ensure that taxpayers are adhering to the tax rules and declaring all income earnt from various investments. The data matching will also allow the ATO to be aware of assets held by taxpayers. They can then investigate how the assets were acquired, and whether the wealth accumulated is logical based on the level of income that is being declared by the taxpayer.
The latest data matching is occurring with insurance companies to cross check the existence and value of assets like fine art, racehorses, boats and private aircraft. They will even be looking at caravans and motorhomes! They will be trying to ensure that taxpayers are adhering to their income tax and capital gains tax obligations as well ensuring there is an explanation as to how taxpayers could afford these assets.
Details will be acquired from insurance companies about the ownership of the abovementioned assets, along with email addresses and policy details. These details include cost and value of the asset, description of the asset and whether finance was used in its acquisition. They will be looking at where the assets may be owned by companies or trusts and determining whether the assets are being used for personal use by the owner or their associates, thus triggering possible fringe benefit tax (FBT) liabilities.
If you have assets like these you should expect some kind of ATO activity in the future.
The ATO is also looking closely at investment properties. Data matching is being used from real estate agents, property management companies, online rental companies (like Airbnb and Stayz), insurance companies, financial institutions and government departments (like state government stamp duty and land tax records) to identify any non disclosure of rental income and capital gains on sale. The matching will also identify properties where concessions may have been claimed as their main residence where they have actually been rented out or left unoccupied.
With access to all the above sources, the ATO will know exactly when the property has been rented and available for rent, when it is sold, what interest has been incurred, what expenses are likely to have been incurred and what expenses are correctly deductible. Previous ATO reviews have found that around 90% of rental property returns have been incorrectly declared, even when tax agents have been used. With access to all the information above, the ATO will be able to easily determine which taxpayers have prepared their returns correctly.
If you have a rental property you will have to expect scrutiny of your affairs in the future to confirm you are doing the right thing.
If you have any questions in relation to your own affairs, please contact your client manager at KSW to discuss your specific circumstances.
Author: Michael Goodrick
*Correct as of 29 August 2024
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
