The Australian Taxation Office (ATO) has intensified its effort to catch landlords who misreport income and fail to lodge returns accurately. By collecting rental bond data twice a year from state and territory regulators, the ATO aims to close the gap and ensure rental property compliance is adhered to.

Data Collection Strategy

The ATO has expanded its data-matching program by collecting rental bond records of more than 2 million landlords. The data obtained will include personal details such as names, addresses, dates of birth, telephone numbers, email addresses, and bank account details for rental providers and tenants. It also covers rental bond transactions, including lease periods, bond amounts, and refund details.

Why Rental Properties?

This project is aimed at identifying landlords who may have not properly disclosed their rental income or accounted for capital gains tax (CGT) due on the disposal of their rental property. It is believed that there is a significant under-reporting in this area and that the level of compliance needs to be improved.

There has been a significant increase in the property investment sector where property owners can rent their properties for short-term stays or even rent out a bedroom, those income has to be disclosed as assessable income in the same manner as rental income for long-term lease.

Areas of Non-Compliance

The ATO has identified common issues among rental property owners, including:

• Incorrect Income Reporting: Landlords may omit rental income.
• Incorrect Deductions: There can be a fine line between work carried out that is a genuine repair (where expenses are fully deductible upfront) and an improvement (where deductions are allowed by way of depreciation).
• Capital Gains Misreporting: CGT treatment on the sale of property may be incorrectly assessed where it has been used for rental purposes.

What Landlords Should Do?

• Lodging Returns on Time: Ensures tax returns are completed and lodged before the due date.
• Accurately Reporting Income: Declare all rental incomes of your property, be it fully or partially rented out.
• Claiming Deductions Correctly: Understand the difference between repair deductions and capital works, mortgage payment apportionment between capital repayment and interest payment.
• Maintaining Accurate Records: Keep tidy and detailed records of income, expenses, and any transactions related to rental property.

If you need assistance navigating the complexity of rental income reporting compliance, consider reaching out to Goenawan Widjaja CPA. Our team of tax experts can guide you to ensure your tax affairs are in line with the current legislation.

Take proactive steps to address any potential issues now, don’t wait until ATO knocks on your door.