Property investors beware: ATO data matching program
Property investors should be aware that the ATO has announced the commencement of a new data matching program that will obtain data from various financial institutions for the 2021-22 to 2025-26 income years. Among other things, information collected will include loan details and borrowing costs. Records relating to approximately 1.7 million individuals will be obtained each financial year and used to identify relevant cases for action, including compliance activities and education strategies.
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Residential investment property loan data to be obtained by the ATO
Recent results of sample audits across individuals conducted under the ATO random enquiry program appeared to show a net tax gap of $9 billion for the 2020 income year, with the incorrect reporting of rental property income and expenses being a significant driver of the gap. Specifically, the estimated net tax gap for rental property expenses contributed around $1 billion or 14% of the total individuals tax gap, with a common driver being the incorrect apportioning of loan interest costs where the loan was refinanced or redrawn and used for private purposes.
Based on the results of the random enquiry program, it perhaps comes as no surprise that the ATO has announced the commencement of a data matching program to acquire residential investment property loan data from financial institutions for the 2021-22 to the 2025-26 income years. Information collected will include:
- identification details – unique client ID, names, addresses, phone numbers, date of birth, email address;
- account details – account numbers, BSB, balances, commencement and end dates, term of loan, opening and closing balances, borrowing costs;
- transaction details – transaction date, amounts, transaction description; and
- property details – addresses, etc.
The data providers include the big four banks (ANZ, Commonwealth, Westpac, NAB), as well as other providers and their subsidiaries, including Adelaide Bank, Bank of Queensland, Bendigo Bank, Bankwest, ING, Macquarie Bank, Suncorp, RAMS, Ubank, St George, Bank of South Australia, Bank of Melbourne and ME Bank. The ATO will be the matching agency and the sole user of the data obtained during this program.
How the ATO will use the data it collects
The ATO will be using the data it obtains to gather information about rental property loans including information such as repayments, interest charged, and borrowing expenses. It will be using this information to identify, assess and treat several tax risks including:
- Lodgment – confirming that taxpayers with rental properties are lodging tax returns and the relevant rental property schedule on or before the relevant due date;
- Income tax – confirming taxpayers with a rental property are correctly reporting interest on loan and borrowing expense deductions in their rental property schedules and associated income tax return labels;
- Capital gains tax (CGT) – confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.
According to the ATO, after a return is lodged, it will be using the data collected to identify relevant cases for action including compliance activities and education strategies. If a discrepancy is identified, taxpayers will be contacted by phone, letter or email. Taxpayers will then have 28 days to respond before the ATO takes any action in relation to the discrepancy.
In addition to compliance action, the ATO will also be using the data it collects to obtain insights which will help develop and implement treatment strategies to improve voluntary compliance. The data collected may also be made available to individual self-preparers through myTax, specifically the rental property schedule interest on loans or borrowing expense labels and rental income tax return labels.
Need help?
If you have redrawn or refinanced your loan recently and are unsure about the tax implications, we can help you. Contact us today for professional help and advice.
For expert advice and assistance in dealing with your Tax Law and Budget Updates in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.