ATO expands data matching to ensure fair play

The Australian Taxation Office (ATO) continues to expand its data-matching capability to ensure taxpayers don’t leave out income or inflate deductions this tax time. New data is now rolling into the ATO from property managers, landlord insurance providers, financial institutions providing loans for residential investment properties and sharing economy providers, as well as income protection policy information.

ATO Assistant Commissioner Tim Loh said, ‘This isn’t a game of Guess Who, as our sophisticated data-matching programs provide us with all the clues we need to track down taxpayers with incorrect information in their tax return.’ ‘We will use this information to identify and educate taxpayers who have made incorrect claims in their return, with a longer-term plan to pre-fill as much information as possible in future years,’ Mr Loh said.

Residential investment property loans and landlord insurance

The ATO’s review of income tax returns show 9 in 10 rental property owners are getting their return wrong. Mr Loh confirmed two new data-matching protocols start this year for rental investors, including investment loan data and landlord insurance policy information. ‘Around 80% of taxpayers with rental income claimed a deduction for interest on their loan, and this is where we’re seeing mistakes. For example, you can’t refinance an investment property to buy personal items, like a holiday to Europe or a Tesla, then continue to claim the interest expenses as a tax deduction.’

With the new landlord insurance data-matching protocol, the ATO is reminding taxpayers that insurance premiums paid for rental properties can be claimed as a tax deduction. Similarly, any insurance payouts received in relation to an investment property must be reported as income. ‘This new data provides us with crucial intelligence to paint a picture of what’s true and accurate in tax returns,’ Mr Loh said. 87% of taxpayers who own rental properties use a registered tax agent to lodge their return. It is important taxpayers provide their agent with the right information to prepare their return  correctly. Taxpayers are responsible for what they include in their tax return, even when using an agent.

Sharing Economy Reporting Regime (SERR)

Record numbers of taxpayers are now working multiple jobs or supplementing their income with side hustles or sharing economy activities. The SERR starts from 1 July 2023, requiring more electronic distribution platforms to report payment information to the ATO. This will come into effect in two phases:

• electronic distribution platforms that provide taxi services, ride-sourcing, and short-term accommodation must report income data from 1 July 2023
• all other electronic distribution platforms must report from 1 July 2024.

‘While the ATO has received data from a number of digital platforms in the past, this legislative change means more platforms will be required to regularly report into the future,’ Mr Loh said.

‘These new rules will give the ATO clear visibility of people who are earning income using these platforms.’ The information from platforms will be matched against what is reported in tax returns or activity statements.



Income protection insurance

The new income protection data-matching protocol was published this month, meaning the ATO will know premiums paid for income protection insurance policies as well as payouts received.

‘You can generally claim a deduction for income protection insurance you buy but remember you can’t claim the deduction if the insurance policy is paid by your super fund.’  ‘If you receive an income protection insurance payout from either your personal insurance policy or from your super fund policy, you must include the income in your tax return,’ Mr Loh said. Ensuring a level playing field and protecting taxpayers who do the right thing is crucial. ‘We are here to help people get their tax return right the first time, but our message is clear – we’re not playing Guess Who with tax returns this year,’ Mr Loh said.

Source: ATO 13 June 2023 QC 7282. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.