The ATO is targeting landlords – Here’s what you need to know

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 tax payers, who have not fully disclosed their income activities.

For example, if a tax payer 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 tax payer 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 under stated.

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 tax payer 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 tax payer 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 a 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 tax payer, 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.   

Call Cornerstone Law Offices on 1300 267 637 for a confidential consultation (or contact us by clicking here).

Taxes, Duties and Family Law

Taxes, Duties and Family Law

Buying a property is a major investment and buying your first property is an exciting milestone. You may be eligible for stamp duty concession. Concessions are available for first home owners, home owners, or first home vacant land. You may also be eligible for the Great Start Grant from the Government.

Exemptions are also available for certain transactions, in which case there is no duty payable. For example, transfers under the Family Law Act.

Are you separated from your partner/spouse? Do you intend to buy his/her share of the house but you are concerned about stamp duty? You can get stamp duty exemption if you finalise your property settlement first and the property is transferred under the terms of a consent order or a binding financial agreement.

The exemption is available even if your partner’s interest in the property is being transferred to you and a third party, or to just a third party, as long as it is transferred under the terms of the consent order or binding financial agreement.

If you can’t borrow, the property has to be sold. The net proceeds of sale can be invested on your and your partner’s behalf or held in a solicitor’s trust account until you finalise property settlement with your partner.

Cornerstone provides you with solid legal solutions. We walk you through the legal process so it is not overwhelming.


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