It's more important than ever to file your taxes properly this year, with the Australian Tax Office (ATO) ready to catch tax dodgers using high-tech data analysis. The data will find discrepancies and identify suspicious claims to help recover what is believed to be $1.1 billion in missing revenue thanks to dodgy tax claims. The ATO is making the most of new data matching systems, and people who have been making extra income using short-term property rental websites like Airbnb and other services are in the ATO’s sights.
From forgetting to put a rental payment in your tax claim to not understanding your legal requirements, mistakes sometimes happen. While the data matching technology this year may uncover these errors while looking for dodgy claims, there’s no need to panic, as there's still time to resolve any income tax issues you might have.
What are the new ATO data matching systems?
Using extensive data from online platform sharing sights like Airbnb and other short-term property rental websites, the ATO has access to the data of approximately 190,000 Australians that they’re looking at closely this year. The program is used to match the data with deductions made in tax returns to catch income tax dodgers following an explosion in the availability of short-stay rentals. Therefore, it’s essential for property owners to be up to date and on top of their income tax to ensure they don’t get stung. Anyone caught in the data matching system will be sent a letter from the ATO advising them that something might not be right with their claim.
Property owners need to keep their income tax up to date
- Know your legal requirements. Under Australian law, any income from renting property, one-off or long term, needs to be declared. Visit the ATO website to learn more about how to avoid a tax debt.
- Keep records of everything, that way if you are assessed you have clear copies of expenditure and income to show them.
- Update your records regularly so that at tax time you're not having to go through a year's worth of data.
- To ensure you’re not hit with a massive bill, you can choose to make a tax prepayment to keep your tax bill low and manageable.
- If you're ever unsure, it’s always best to consult a tax adviser for more details or assistance in managing your short-term rental.
What to do if you receive a letter from the ATO
Taxpayers who are identified through the new data matching program will receive a letter from the ATO. It is crucial that you don’t ignore this. You will have a minimum of 28 days to respond, giving you the opportunity to either adjust your tax claim or provide evidence that your claim is fair before any further action by the ATO is taken. If they don’t hear from you, they will reassess your return and you could still be hit with a fine.
For innocent mistakes, the ATO will be able to reverse any action with evidence. However, for more serious claims on a larger refund than the taxpayer is entitled to, the taxpayer will have to pay back the surplus amount plus interest, making for a big hit to anyone's savings account.
Finance for investment properties
Whether your looking for a long-term or short-term rental investment property, working with an experienced mortgage broker is the best way to secure a home loan approval. Depending on your strategy, the loan application process will vary dependent on the income the property can generate.
In a tightening credit market, securing the lowest interest rate for your investment property is key to securing a good return. Contact the Mint Equity team to find the best home loan for your investment property.