Working Group agendas
An overview of future Working Group meeting agenda topics was discussed, including:
- omitted income and insufficient evidence to substantiate claims (optimising how we use third party data)
- lack of apportionment of
- interest expense when a portion of the loan was used for private purposes
- income and expenses according to ownership interest
- lack or incorrect apportionment of
- expenses where property was only available to rent part of the year
- expenses where only part of the property is being used to earn income
- Mistakes relating to incorrect claiming of initial repairs and capital improvements, and the distinction between repairs and other capital expenditure (for example capital works and capital allowance deductions)
- recommendations and next steps education and awareness of products and channels.
Multidisciplinary team
The Australian Taxation Office (ATO) presented an overview of the proposed ATO Multidisciplinary Team (MDT) to improve rentals reporting, and ways members of the working group can influence the form and function of the MDT.
Improving rental reporting
The ATO provided an update on the current rental landscape, including:
- the ATO’s strategic approach to facilitate correct rental reporting and common areas of concern
- a brief overview of the tax gap findings
- a high-level overview of our rental third party data program.
Rental property reporting
Members considered the challenges and opportunities for the reporting of rental properties.
Members used the following topics to explore what is working well, what has potential and what is not working well:
- Natural systems thinking
- Trends
- Communications from the ATO (including interventions)
- Third party data
- Sharing economy
- Guidance materials and tools
- Pressure Points
- Policy.
Member comments
Natural systems
- Members noted the ATO is increasingly more sophisticated in obtaining and using third party data.
Third party data
Members noted the ATO can work more closely with:
- banks for mortgage statements
- real estate agents for data and to educate them on how to provide correct data to clients (property management statements)
- lawyers to educate on the tax implications of decisions
- quantity surveyors for a more uniform information statement (site inspections)
- software developers to make it easier to report on apportionment and split usage.
Pressure points
- Members noted there is currently no registration for quantity surveyors, anyone can use the term.
- Property managers do not always provide information their clients require for taxation purposes. Their annual statements are difficult to understand and are not prepared with tax compliance in mind. It was suggested that a proforma statement, designed by the ATO, might improve the quality and completeness of the information property managers provide clients.
- Expectations of agents needs to be more clearly defined, as agents are receiving clients with incorrect information given by previous agents.
Online content - External communications
- Publishing error rates serve no purpose other than to undermine confidence in tax agents unless the behaviours behind these rates are also published. These rates indicate the errors were made by the tax agent.
- Online content needs to range from new–to–rent, to English as a second language, to tax agents.
Tax returns – Rental schedule
- There needs to be a feedback loop for nudge messages – incorrect nudges can cause stress to clients. There is no way for the tax agent to reply or correct this misplaced nudge message.
- Opportunities to provide substantiation at time of lodgment will save time and expenses for clients and agents.
- The ATO can link the length of ownership to the character of the repairs to reduce capital vs repairs confusion.
- The ATO should arm tax agents with information to determine whether the client is giving them the correct amount of documentation/information to correctly lodge the statement.
- The rental schedule should be simplified for properties with multiple owners, and for those needing apportionment due to private use.
Better guidance materials needed on:
- holiday homes and ‘genuinely available for rent’
- apportionment of deductions for non-arms-length rental income
- capital improvements vs repairs, including more complex examples that align with realistic client circumstances
- the impacts on interest apportionment when redrawing loans.