The Australian Taxation Office (ATO) is coming for property investors this tax season

Wayne StaalHow to save tax, Small Business

The Australian Tax Office (ATO) is set to increase its focus on rental properties and Airbnb.

  • The ATO will audit 4,500 “high-risk”‘ taxpayers relating to their 2017-2018 returns for rental properties
  • The agency is also improving its data matching and in future will use property management reports from online agents such as AirBnB
  • Work-related expense deductions are also in the firing line, but average claims are reducing

AirBnB and Rental property owners beware, The Australian Taxation Office (ATO) is coming for property investors this tax season. The ATO has issued a warning to property investors after uncovering false claims in a recent random sample (9 in 10 had an error). Ramping up its enforcement activities the ATO will undertake 4,500 audits of taxpayers it considers are “high risk” because they overclaim or don’t declare income relating to rental properties.

Property owners omitting income from Airbnb and other accommodation-sharing schemes have been singled out as a particular area of focus as the ATO looks to crack down on tax rorts.

ATO assistant commissioner Adam Kendrick said it would audit 2017-2018 financial year tax returns relating to rental investments that its data analytics systems had flagged as potentially problematic.

“In the past we have not had a really big presence around rentals, but we are really ramping it up now,” Mr Kendrick said.

Under Australia’s negative gearing system, individuals can deduct any losses they make on investments, including mortgage interest, from their overall income when they calculate their tax liability.

But Mr Kendrick said some taxpayers were abusing the law, and the ATO considered they were “high risk” because they either overclaimed deductions or did not declare income at all.

He said the ATO was also concerned that occasional income earned through sharing economy platforms, such as Airbnb, was not being declared.

Audits on rental deductions will focus on:

  • Over-claimed interest;
  • Claiming capital works as repairs;
  • Incorrectly lodging expenses for holiday homes lent to others; and
  • Omitting income from accommodation sharing.

Penalties can run up to 75% of whatever claim has been made and the ATO said it will scour through data from financial institutions, property transactions, rental bonds and online accommodation booking platforms

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