Rental properties to be data matched by ATO

In May 2021, the ATO announced a new data matching program with property management software providers. The program will involve collecting the following data from property management software providers for the 2018–19 to 2022–23 income years:

• Property owner details (including name and address)

• Bank account details of property owner

• Email addresses and contact phone numbers

• Business names or ABNs if applicable

• Address of rental property

• Rental income category (ie residential or commercial)

• Rental income and expense amounts

• Property manager details (ie real estate agents)

• Contact details and addresses

• Licence numbers.

The collection of this data will help ensure that:

• rental property owners are not over-declaring expenses

• the correct owners of the property are declaring the rental income

• all capital gains events are otherwise accounted for, and

• the rental property managers are compliant with their obligations.

Risk mitigation steps

By linking rental property information with relevant bank accounts, the data matching program will be able to identify where discrepancies from expected outcomes exist. As the program will look at information commencing from the 2018–19 income year, it may be necessary to go back an amend where errors have been found. Examples of these types of discrepancies are:

a) Non-declaration of income

This may occur in situations where a taxpayer has multiple rental properties, yet only declares income for some of them. The data matching program would be able to identify where deposits into a specific bank account have been unaccounted for in the tax return.

b) Incorrect declaration of income

This may occur in a situation where the taxpayer who owns the rental property and the taxpayer who claims the net rental income are different people. An example of which may be a taxpayer on a lower income tax bracket, or otherwise not using their tax-free threshold. By matching the income to ownership details, there is greater risk of an investigation understanding where these errors have occurred.

c) Expenses not applicable to rental property

This data matching program, when linked to another data matching program for bank accounts, will provide the tax office with a clear indication of where mortgages lie for individual taxpayers. With this in mind, it would be much easier for an investigation to uncover where deductions are being claimed. In some instances, individuals may be claiming their personal interest in their rental property schedules.

Also, situations may occur where some expenses such as repairs and maintenance are not listed on a rental property management statement. However, situations where large expenses are being claimed during the middle of a tenancy (as opposed to at the end of a tenancy) may have different taxation outcomes (depending on the type of expense). The data matching program will make it more difficult for a taxpayer to substantiate claims other than the ones they are entitled.

Our focus is to ensure that you are getting the best possible tax outcome. However, if you review your records back in the 2018–19 or 2019–20 income years and notice that you made an error, please let us know.

We would be happy to assist you in the best course of action for your circumstances.