You may not be aware that in recent years, the ATO has been actively working to reduce the tax gap (the difference between the amount of tax owed and the amount of tax paid). One of the ways it is doing this is through data matching technology.
The ATO has been using this technology to compare information from third party sources, such as banks and other financial institutions, with information provided by taxpayers in their tax returns.
The latest move by the ATO involves the collection of information on 1.7 million residential property loans allowing the ATO to compare taxpayer claims and returns.
The ATO claims there is a $9 billion tax gap from individuals not in business, and one of the main areas they will be focusing on is rental property claims.
According to the ATO, 90% of rental claims are wrongly filed. This means that taxpayers are either claiming deductions they are not entitled to or are not providing accurate information.
The ATO’s move is an indication that it is stepping up its efforts to ensure that taxpayers are providing accurate information on their tax returns.
This year, the ATO will be cracking down on individual tax returns, looking for:
- hidden wages,
- incorrect work-related expenses, and
- incorrect rental claims.
Also, if you are claiming Work From Home (WFH) expenses this year, make sure you know the rules and contact us for our article on what you can and cannot claim.
To find these gaps, the ATO will be using data matching technology through the collection of information to be provided by banks and lenders. These include, but not limited to, the big four banks as well as other financial institutions involved in rental property investment loans such as Macquarie through to regional institutions such as Bendigo Bank and loan providers including Ubank and RAMS.
This new data matching tool will harvest information from these sources for 2021-22 through to 2025-26.
The data matching program will be able to collect:
- Client identification details – names, addresses, phone numbers and dates of birth
- Loan account details – account numbers, BSBs, balances, total interest charges, total repayments and commencement and end dates
- Transaction details – transaction dates, transaction amounts and whether the transaction was a debit or credit on the account
- Property details – addresses of the loan assets
The data feed will supplement the ATO with additional information on rental property loans to help them better identify and target those individuals who may be under reporting their income or overclaiming deductions.
The ATO is experienced in using data matching technology to reduce the tax gap as it has already implemented at least two dozen operating protocols.
The ATO has emphasised that its goal ‘is to help individual taxpayers get their tax returns right in the first place’.
By collecting this information, the ATO can identify areas where taxpayers are making mistakes and provide guidance on how to correct them. This will help to reduce the likelihood of audits and penalties for taxpayers.
The ATO has also emphasised it will be targeting those individuals who may be deliberately under-reporting their income or overclaiming deductions. This is because these individuals are not only depriving the government of much-needed revenue, but they are also creating an unfair advantage over honest taxpayers who are paying their fair share of taxes.
As always we are here to help with any questions related to the planning of your tax returns.
Reach out if you have any further questions.