Individual property investors should be aware that the ATO has announced a new data matching program that will obtain data from various financial institutions for the 2021-22 to 2025-2026 income years. Records relating to approximately 1.7 million individuals will be obtained each financial year and used to identify relevant cases for administrative action, including compliance activities and education strategies.

Recent results of sample audits across individuals conducted under the ATO’s random enquiry program appeared to show a net tax gap of $9 billion for the 2020 income year, with the incorrect reporting of rental property income and expenses being a significant driver of the gap. Specifically, the estimated net tax gap for rental property expenses contributed around $1 billion of 14% of the total individuals gap, with a common driver being the incorrect apportioning of loan interest costs where the loan was refinanced or redrawn for private purposes.

The data providers for the new program include the big 4 banks (ANZ, Commonwealth, Westpac and NAB), as well as other providers and their subsidiaries, including Adelaide Bank, Bank of Queensland, Bendigo Bank, Bankwest, ING, Macquarie Bank, Suncorp, RAMS, Ubank, St George, Bank of South Australia, Bank of Melbourne and ME Back. The ATO will be the matching agency and the sole user of the data.

According to the ATO, after a return is lodged, it will use the data collected to identify relevant cases for administrative action including compliance activities and education strategies. If a discrepancy is identified, taxpayers will be contacted by phone, letter or email, and will then have 28 days to respond.

The ATO will also use the data to gain insights to help develop and implement treatment strategies to improve voluntary compliance. The data may also be made available to individual self-preparers through myTax, specifically the rental property schedule interest on loans and/or borrowing expense labels and rental income tax return labels.