The Australian Taxation Office (‘ATO’) aka the ‘tax man,’ is targeting landlords and there are three instances where a landlord needs to tread carefully.
In recent years, the ATO are engaging in data matching, using real property rental bond data from the States and Territories in an effort to catch out taxpayers, who have not fully disclosed their income activities.
For example, if a taxpayer is a landlord and has lodged a rental bond with the respective State government agency, such as the Residential Tenancies Authority in Queensland (‘RTA’) but has not disclosed their rental income for the same property the taxpayer may need to consider making a voluntary disclosure. The ATO can data match the respective State bond lodgement records and will compare instances where a bond has been lodged with a tax assessment where a rental income has either not be declared or has been understated.
The ATO legally can carry out this compliance activity under the Guidelines on Data Matching in Australian Government Administration 2014. Section 353 -10 of Schedule 1 of the Taxation Administration Act, 1953 affords the ATO with a coercive power to compel data providers, such as the RTA to provide this information when requested. The collection and use of this data do not, therefore, contravene an individual’s right to privacy as Principle 6 of Schedule 1 of the Privacy Act, 1988 permits this form of enforcement related activities.
By the same protocol, if a taxpayer has sold a property and the sale price has not been declared in the tax payer’s tax assessment as a capital gain, if appropriate, the ATO could catch you out. Even if the taxpayer is entitled to the primary place of residence exemption is needs to be declared.
During the financial year 2014 to 2015, according to the ATO’s website, ‘data matching and compliance strategies identified over 8,000 cases where real property dealings had not been treated correctly and raised an additional $161 million in revenue’.
A third way you could encounter difficulty with the ATO, as a landlord, is if you derive an income from using your home, either as a whole or part, such as a room rented out as on-line share accommodation, such as through Airbnb or Gumtree. There is an obligation on a taxpayer, who gains rental income in this way to declare the income in their tax assessment. However, if a family member is boarding or lodging, the ATO regards this as a domestic arrangement and not rental income.
What can you do if you feel you could come under scrutiny? A voluntary disclosure can reduce any penalties by up to 80% and dependant upon the relevant circumstances there could be a reduction in the rate of general interest charged.
This article should not be regarded as either legal or financial advice, it is a summary and discussion of the basic principles associated with deriving a rental income.
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