Residential Investment property – ATO Data matching and increased Audit focus

As seen in Woopi News July 2023

The Australian Taxation Office have released data that 90% of Tax Returns containing a residential property rental schedule have contained at least one error. Common errors include the incorrect treatment of purchase related capital costs, incorrect claims for expenses particularly the apportionments for private use on short term accommodation and holiday homes and incorrect classification of depreciable capital works as fully expended repairs.

The ATO for the 2022 Financial Year started collecting data from financial institutions not only about deductible interest, but loan refinances and loan redraws that may or may not be related to the investment property. There is a focus on tainted loans, where the loan is not 100% related to an investment property or a group of properties. Where an amount has been redrawn for a private purpose the interest needs to be apportioned to disregard interest connected with that percentage of the loan.

The ATO has been collecting data from short term accommodation platforms such as Stayz and AirBNB for a few years now but hasn’t made this data available to accountants to cross check with information supplied by clients. The ATO will soon be data matching with some of the major real estate software platforms used by managing agents.

As a result of this increased data matching, residential investment properties continue to be an area of audit focus, putting additional pressure on accountants to take reasonable care when completing Tax Returns. Accountants are now ensuring they too retain sufficient evidence to substantiate the contents of the Tax Return, meaning its now more important than ever to provide your accountant with accurate information to ensure that if the return is selected for review, that the matter can be resolved efficiently and not escalated to a more extensive audit by the ATO.

If you have one or more investment properties and would like to book a meeting with Anita Perrett from StaySharp Accounting to review your documents and commence preparation of your 2023 Tax Return, please book online at and select Rental Property Tax Consultation as the appointment type.

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