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Residential Rental Properties Group key messages 4 April 2024

Key topics discussed at the Residential Rental Properties Working Group meeting 4 April 2024.

Published 13 August 2024

Rental third party data

The Australian Taxation Office (ATO) gave a presentation outlining the focus of the Data Acquisition and Optimisation program on collection of new third-party rental data to support correct reporting.

The future vision is a tax system driven by verifiable data to drive a reduction in the tax gap and improve the client experience.

Property management data is being analysed for its application in managing the rentals risk based on its accuracy, reliability and value.

Members discussed and considered the following:

  • How rental transactional data could be used and presented.
  • Data sets such as property management data where the client may have a secondary source.
  • Nudge/prompter messages.
  • Embedding rules into system to flag risks.
  • Enhanced real time analytics for areas of concern.

Member comments

  • Pre-filling labels is great, but just having the data visible on the pre-fill report is 98% of the job done as far as tax agents are concerned.
  • Local authorities' data divides properties into categories based on use.
  • Property managers’ categorisation (particularly depreciation, repairs and maintenance) may not reflect correct tax treatment – need the ability to change that data where we know it’s incorrect.

Tax gap findings

The ATO outlined the Random Enquiry Program results, emphasising that while amounts overclaimed or under-reported by individuals is relatively small, collectively the overall revenue impact is significant.

For rental deductions some cases had a lack of or incorrect apportionment of expenses where property was only available to rent part year or interest expenses when a portion of the loan was used for private purposes.

Mistakes were seen relating to capital works and capital allowance deductions.

Some investors were unable to locate records to substantiate claims or had no response to requests for information.

Members discussed consultation questions in small groups. Issues the groups were asked to consider included:

  • What are the types of interactions you typically have with your client throughout the lodgment process?
  • Are there ways the ATO could support you to ensure your clients provide you with all the necessary information to lodge an accurate return?
  • What do you see as your role in reducing the Individuals not in business tax gap?

Member comments

  • Where an amount cannot be substantiated it counts as an adjustment. In such instances multiple ways to substantiate amounts are investigated.
  • It was noted that one member organisation has a checklist for rental properties which their member's send to their clients. The checklist includes the question of apportionment.
  • Prompting questions are important when agents are talking with clients, for example, 'Have you had re-drawdowns on interest? Were these damages evident at purchase? Did you replace with better quality, fix the problem, or replace the whole thing?'
  • It was noted that the ATO’s Rental guide that is given to taxpayers 'is the best booklet the ATO has ever produced'.

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