Australian Taxation Office (ATO) – Tax Audit Targets

1. Holiday Rentals under the Microscope

The ATO have holiday rentals under the microscope. The ATO has advised that it is sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods a holiday home is rented out, or is genuinely available for rent.

They advise that, to avoid making mistakes on their tax return, property owners should:

• Keep accurate records to ensure they declare the right amount of rental income and have evidence for claims made; and
• Only claim deductions for the period the property is rented out, or is genuinely available for rent.

If a property is rented at below market rates, for example to family or friends, claims for deductions must be limited to the income earned while rented.

2. Credit and debit cards data-matching program

The ATO has announced that it will conduct a data-matching program on credit and debit card transactions for the 2012/13 and 2013/14 years.

The program helps the ATO assess the taxation compliance of individuals and businesses. The ATO matches the data provided by financial institutions against taxpayer records to identify those who may not be meeting their registration, reporting, lodgement and/or payment obligations to help provide a more level playing field for those businesses doing the right thing.

Businesses operating in the cash economy are specifically targeted by this data matching process. As part of their compliance activities the ATO will continue their scrutiny of businesses deliberately avoiding their taxation obligations. These businesses are becoming more visible as data matching activities become more sophisticated.

The objectives of the credit and debit card data matching program are to:

1. Identify businesses that are not reporting some, or all of their income.
2. Identify those who are operating businesses but are not registered with the ATO.

Data will be collected from the following financial institutions:

• American Express Australia Limited;
• Australia and New Zealand Banking Group Limited;
• Bank of Queensland Limited;
• Bendigo and Adelaide Bank Limited;
• BWA Merchant Services Pty Ltd;
• Commonwealth Bank of Australia;
• Diners Club Australia;
• National Australia Bank Limited;
• St George Bank; and
• Westpac Banking Corporation.

Based on previous programs, it is estimated that over 8 million records will be acquired, relating to over 940,000 merchants. These records are linked to approximately 90,000 individuals and 850,000 non-individuals.

Should you require assistance with your tax return or with claiming deductions for a holiday home please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.