The ATO is targeting investors – this is what they’re looking for.
Looks like the ATO has got investors in their sights this year. The government has been really clamping down on the kinds of deductions that investors can claim, but now the ATO is going to be going through investor’s tax returns with a fine tooth comb.
From the Herald Sun:
Dodgy landlords’ social media accounts will be put under the blowtorch by the ATO as they crack down on incorrect rental deductions.
Accommodation booking websites will also be examined to make sure landlords are not making false claims simply to get money back.
“Dodgy landlords”? Whatever happened to innocent until proven guilty?
The ABC was being a little more balanced, and informative, letting us know that the ATO would be focusing on claims going through tax agents, and was planning on conducting 4,500 backward looking audits:
The Australian Taxation Office (ATO) is ramping up its enforcement activities and will undertake 4,500 audits of taxpayers it considers are “high risk” because they overclaim or don’t declare income relating to rental properties.
He said about 85 per cent of about 2.2 million annual tax returns relating to rental properties were lodged through a tax agent, so the ATO would also work with tax professionals to make more taxpayers aware of potential errors.
“In the past we have not had a really big presence around rentals, but we are really ramping it up now,” Mr Kendrick said.
But Mr Kendrick said some taxpayers were abusing the law, and the ATO considered they were “high risk” because they either over-claimed deductions or did not declare income at all.
He said the ATO was also concerned that occasional income earned through sharing economy platforms, such as Airbnb, was not being declared.
Interesting that they’re gunning for the 2017-18 financial year. Always worth remembering that they’ve got the power to do that.
And over at Yahoo Finance, the ATO Commissioner wasn’t making any apologies, and was actually coming out swinging:
A recent batch of 300 audits on real estate investors saw that almost 9 out of 10 returns contained errors, according to ATO commissioner Chris Jordan.
“We’re seeing incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent,” he said Thursday at a speech in Hobart.
“A lot of people are getting things a little bit wrong, which adds up to a lot.”
“… For those who are antagonistic towards us, and our reform program, who do not want to pay their share of tax, who see the ATO as something of an enemy, I believe community sentiment is against you and will increasingly become more so,” he told the crowd of tax agents.
Nice check-list of things to be careful for there…
I’m pretty confident my tax-claims are water-tight, so I’m not too fussed about this.
But I do think this means that 2019 will be the year of cashflow.
With property prices stalling, a lot of people are going to be looking at their negatively geared properties and wondering if it is really worth it.
If the tax office comes knocking on their door and asking them to ‘correct’ their past accounts, and tip even more money into the government coffers, that might find things are starting to get tight.
For years now I’ve been saying to my students that if you’re serious about being an investor, you need to be serious about cashflow. I reckon Australia is about to wake up to this, big time.