How do the ATO Check your property rental income?

Clients often ask me how do the ATO cross check the information declared in their investment property tax returns? And I am afraid to say the answer is more insidious than what you hoped for. 

The first surprising, yet upon reflection obvious, place data is sourced is from rental software providers that are required to give to the ATO details of rent and expenses for residential rental properties managed by a property manager.  That’s right, the software your managing agent is using to manage your property is reporting to the Tax Office details about how much rent is being collected as well as the associated expenses.

Well ok that’s a bit of a surprise but where else might the ATO collect information about your rental?

• Banks (of course)
• Landlord insurers
• Rental Bond Authorities
• State and territory revenue collection agencies (e.g. when you transfer a property title)
• AirBNB and similar Short Term Rental Platforms (STR)

So what are the ATO looking for when they squeeze all these data collection agencies?

Recent results from property data matching found the following common errors:

• instead of reporting gross rental income and claiming expenses, net rent (after expenses) is reported and the same expenses are claimed a second time
• properties are being omitted from returns
• where they are owned by multiple stakeholders, only one owner reports the property – when both are required to report
• not reporting the rental income received when purchasing an already tenanted property that the new owner intends on moving in to
• capital works or depreciating assets being claimed as repairs and maintenance.