Landlords targeted in expanded ATO crackdown

Posted on 2 September 2024 | by Allan Hall

ATO Expands Property Management Data Matching Program to Strengthen Tax Compliance

The Australian Taxation Office (ATO) is expanding its Property Management Data Matching Program as part of its ongoing commitment to enhance tax compliance.

This program plays a critical role in identifying and addressing potential discrepancies in rental income reporting, particularly within the property management sector.

Key points

Expansion of Data Matching Program: The ATO has expanded its program to better track rental income reporting and ensure tax compliance within the property management sector
Enhanced Data Collection: The program now collects more detailed rental data, cross-referencing it with ATO records to identify under-reporting or non-compliance
Focus on Compliance: Property owners and managers are advised to maintain accurate records, as the ATO’s enhanced capabilities increase the likelihood of detecting discrepancies.

The Property Management Data Matching Program enables the ATO to collect and analyse a wide range of data from property management agencies across Australia. This includes detailed information on rental income, property expenses and other financial activities related to investment properties. The data collected is cross-referenced with other ATO records to identify cases of under-reporting or non-compliance with tax obligations.

Objective and Scope

The primary objective of the expanded program is to ensure that all property owners and managers accurately report their income and meet their tax obligations. By gathering data from property management software, rental bond authorities and other relevant sources, the ATO can detect inconsistencies between reported income and actual rental earnings. This helps to identify individuals and entities who may be attempting to under-report their income or avoid their tax responsibilities.

Implications for Property Owners and Managers

The program covers a broad spectrum of rental properties, including residential, commercial and short-term accommodations.

Property owners and managers are advised to ensure that their records are accurate and up to date. The ATO’s expanded data matching capabilities mean that discrepancies in rental income reporting are more likely to be detected, leading to potential audits, penalties or other compliance actions.

By leveraging advanced data matching technology, the ATO aims to ensure that all taxpayers meet their obligations. Read more »

CONTACT ALLAN HALL BUSINESS ADVISORS

ATO, compliance, data, income, property, records, rental property, tax

Rental properties and second-hand depreciating assets

Posted on 10 October 2022 | by Allan Hall

Find out if you can claim second-hand depreciating assets for your residential rental property

Second-hand depreciating assets for residential rental properties are depreciable items previously used or installed ready for use by you or another entity.

In most cases, they are things that were existing in:

a property when you purchased it
your private residence that was later rented out.

Items can include things like:

flooring, window coverings
air conditioners, washing machines, alarm systems, spas, pool pumps
items used for both the rental property and your own home.

Since 1 July 2017, you can’t claim the decline in value of second-hand depreciating assets, unless the property is used for carrying on a business (for example a hotel) or they are an excluded entity. The change doesn’t apply to properties rented out prior to this date, or where the property is either:

newly built
substantially renovated (where all or most of a building is removed or replaced), and
- no-one else has claimed a deduction for the assets
- no-one resided in the property before your clients acquired it, or
- you acquired the property within six months of the build or substantial renovation.

To help get it right, here are a few questions to ask yourself:

When did you purchase the property?
Was it a new or existing build?
Did you live in the property before renting it out?
When did you start renting out the property?
Was the asset already in the rental property when you bought it?
Is the property used for business purposes?

CONTACT ALLAN HALL

Tax time focus on rental property income and deductions

Posted on 15 August 2022 | by Allan Hall

ATO cracks down as 90% of rental income tax statements are wrong

Income and tax deductions from rental properties is one of the four key areas the Australian Taxation Office (ATO) is focusing on this tax time.

It’s an area that’s easy to get wrong and needs extra care when lodging.

The ATO Random Enquiry Program has found that nine out of ten tax returns that reported rental income and deductions contain at least one error, even though most of those property owners were assisted by a registered tax agent.

The ATO is therefore urging rental property owners to ensure they carefully review their records before declaring income or claiming deductions this tax time, and for registered tax agents to ask a few extra questions of their clients.

Assistant Commissioner Tim Loh explained, “Registered tax agents can only work with the information they gather from their clients, and we know some clients won’t know everything they need to tell their agent. We don’t expect agents to be Sherlock Holmes, but we do expect them to ask the right questions to ensure their client’s return is right.”

Mr Loh said that rental property owners are urged to ensure they know what income they need to declare and what can be claimed as a deduction.

“We are concerned about mistakes, and in particular, leaving out income or deliberate over-claiming of rental property deductions this year.”

“Getting it right the first time, will ensure you receive the tax refund you are owed, and avoids us knocking on your front door down the track.”

Include all rental income

The ATO receives rental income data from a range of sources including sharing economy platforms, rental bond authorities, property management software providers, and state and territory revenue and land title authorities.

“The amount of data we access grows each year, making it easier and faster for us to spot any rental income that you have charged your tenants, but haven’t declared,” Mr Loh said.

When preparing tax returns, make sure all rental income is included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

“Income and deductions must be in line with a rental property owner’s ownership interest, which should generally mirror the legal documents.”

Get your expenses right

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums. Other expenses such as borrowing expenses and capital works need to be claimed over a number of years. Capital works can include replacing a roof, or a new kitchen renovation. Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Refinancing or redrawing on a rental property loan for private expenses such as holidays or a new car, means that the amount of interest relating to the loan for the private expense can’t be claimed as a deduction.

If income from a rental property in a holiday location is earnt, it needs to be included in tax returns.

“You can claim expenses for the property to the extent that they are incurred for the purpose of producing rental income, not where your family and friends stayed in the property for a mini getaway at mate’s rates, you use it yourself, say at Christmas, or you stopped renting the property out,” Mr Loh said.

“Other circumstances where deductions cannot be claimed include pretending that your property is available for rent when it really isn’t, for example you advertise significantly above a reasonable market rate compared to similar properties or you place unreasonable restrictions on potential tenants.”

“Our 2022 Tax Time Toolkit for Investors also contains a number of fact sheets for landlords, including Top 10 tips to help landlords avoid common tax mistakes. These tips will help you avoid common mistakes and save you time and money.”

Selling a rental property

When selling a rental property, capital gains tax (CGT) needs to be considered and any capital gains or capital losses need to be reported.

When calculating a capital gain or capital loss, it’s important to get the cost base calculation right. Cost base is usually the cost of the property when purchased and any costs associated with acquiring or selling it. These can be things like stamp duty, legal fees, valuations and real estate sales fees. Any capital works claimed as deductions may also need to be subtracted from the cost base.

“If you’ve sold a rental property that was once your home, you may be entitled to partially claim the main residence exemption. You will need to claim this exemption in your tax return when you lodge.” Mr Loh said.

Records of all income and expenses relating to rental properties, including purchase and sale records, must be kept. This ensures all eligible deductions are captured when preparing tax returns and capital gains tax can be calculated correctly when the property is sold.

“It’s also important to note that when selling any property for more than $750,000, vendors / sellers must have a clearance certificate otherwise 12.5% will be withheld.” Mr Loh said.

Clearance certificate applications can take up to 28 days to process so to avoid delays, sellers should apply as early as practical using the online form. Having tax affairs up to date, including all lodgments, helps speed up the assessment of an application and a certificate being issued. The certificates last for 12 months and if selling more than one property in the year, it can be used for multiple sales. Foreign residents are generally not eligible for a clearance certificate but may apply to vary the withholding amount.

Apply for a certificate and find out more at ato.gov.au/FRCGWcertificate

Keep good records to prove it all

Records of rental income and expenses should be kept for five years from the date of tax return lodgments or five years after the disposal of an asset, whichever is longer.

“Get your books in order and start keeping records as soon as you make the decision to earn rental income. It makes tax time so much easier for you and your registered tax agent” Mr Loh said.

Adequate records should demonstrate how the expense was incurred for the rental property and the extent they relate to producing rental income. They must include the name of the supplier, the amount of the expense, the nature of the goods or services, the date the expense was incurred, and the date of the document.

“We can ask for proof of any claim that you make, so good record keeping is the only way to ensure you can claim everything you are entitled to.”

“Remember, when your return is lodged, you are on the hook for the claims you are making, not the registered tax agent.”

For more information, visit ato.gov.au/rental

CONTACT ALLAN HALL

ATO priorities this tax time

Posted on 30 May 2022 | by Allan Hall

Four priorities for the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

record-keeping
work-related expenses
rental property income and deductions, and
capital gains from crypto assets, property and shares.

These ATO’s priority areas ensure that there is an appropriate level of scrutiny on the correct reporting of deductions and income.

Taxpayers can take steps to lodge right the first time

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where they see people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules,” Mr Loh said.

You must have spent the money yourself and weren’t reimbursed
If the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income
You must have a record to prove it.

Record-keeping

With some weeks left until 30 June, start organising the income and deductions records you’ve kept throughout the year. This will guarantee a smoother tax time and ensure you claim the deductions you are entitled to.

For anyone who deliberately tries to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Lodge right, no worries

We often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income.

Available pre-fill information and readiness to lodge can be easily checked in the ATO app this tax time.

NB: While the ATO receives and matches a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, they don’t pre-fill all of that information for you.

Work-related expenses

Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year.

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” said Mr Loh.

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring mum and dad.

You can easily keep track of your expenses with myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” Mr Loh said.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Mr Loh said.

CONTACT ALLAN HALL

NSW COVID business support package released

Posted on 31 January 2022 | by Allan Hall

NSW Government announces $1bn support package for struggling NSW small businesses.

Targeted package provides support for businesses that experienced cash flow issues and the immediate economic impacts of the Omicron outbreak.

Key points:

Business support to help reimburse the cost of rapid antigen tests
Extension of the Commercial Landlord Hardship Grant
Additional funding for the performing arts sector.

Businesses, workers and the performing arts across NSW are all set to benefit from a major financial support package of more than $1 billion to help those that have been hardest hit by the Omicron wave.

The package includes financial support for small business to buy rapid antigen tests (RATs) to help keep employees safer and a new Small Business Support Program to assist businesses to help keep workers employed.

Whilst COVID-19 case numbers are now declining, the NSW Government is determined to support businesses that have been most affected during the Omicron wave of the pandemic.

Small Business Support Program

Employing businesses with an annual turnover of between $75,000 and $50 million, who have experienced a decline in turnover of at least 40%, will receive a lump sum payment covering up to 20% of weekly payroll, up to a maximum of $5,000 per week for the month of February 2022. The minimum weekly payment for employers will be $750 per week.

Eligible non-employing businesses will receive $500 per week (paid as a lump sum of $2,000).

The support package only covers the month of February 2022. Applications for support are expected to open mid-February and we are awaiting further details to be provided by Service NSW.

NSW fees and charges rebate increased and extended to RAT tests

In addition, the existing Small Business Fees, Charges and Rebate will be increased by 50% from the current $2,000 limit to $3,000 and employing businesses will be able to use the rebate to obtain RATs. This will support worker availability by helping reduce costs to small businesses and enabling healthy staff who have been exposed to COVID-19, but test negative, to return to work.

Commercial landlord relief extended

The protections under the Retail and Other Commercial Leases (COVID-19) Regulation 2021 for small retail and commercial tenants will be extended for an additional two months, until 13 March 2022. This regulation prohibits certain actions by landlords (such as lockout or eviction) unless they have first renegotiated rent with eligible tenants and attempted mediation.

NSW Performing Arts Package extended

The existing NSW Performing Arts COVID Support Package has been extended until April 2022. See CreateNSW for full package details.

Please be aware that there is a high level of scamming activity around COVID-19 rules and regulations and, in particular, grants and relief. These scams are increasingly sophisticated and many involve impersonation such that they may appear to come from legitimate advisors (such as Allan Hall).

At Allan Hall, we will never request money upfront, deposits, transfers to personal accounts, payments via gift cards or other unexpected or unusual payment methods. If in any doubt, contact us via phone before taking actions that appear to be at the request of Allan Hall.

NSW Commercial Rent Protection

Posted on 7 December 2021 | by Allan Hall

NSW extends commercial rent relief for SMEs to help them recover during this holiday season

The NSW Government extended the rent relief provisions for eligible businesses with a turnover of less than $5 million until 13 January 2022, under the Retail and Other Commercial Leases (COVID-19) Regulation 2021.

If your business is unable to meet lease commitments due to the current COVID-19 public health orders, you may be eligible for protection.

Under the Regulation, retail and commercial property owners must renegotiate rent with eligible tenants in good faith having regard to the leasing principles in the Code of Conduct and the economic impact of the COVID-19 pandemic.

Overview of commercial leasing changes

On 14 July 2021, the NSW Government enacted the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the Regulation). Amendments passed on 13 August 2021 provide even greater protections to impacted tenants by reinstating National Cabinet’s Commercial Leasing Code of Conduct.

Amendments on 1 December 2021 extend rent negotiation rights to impacted tenants with an annual turnover less than $5 million for the period 1 December 2021 – 13 January 2022.

The Regulation ensures that the economic impact of COVID-19 is shared by property owners and tenants. The protections in the Regulation, combined with the land tax concessions and the newly established Commercial Landlord Hardship Fund, will help limit the long-term economic damage of COVID-19 and maximise the number of businesses that can resume normal operation when public health orders are lifted.

What actions has the Government taken on commercial leases?

Under the Regulation, property owners must negotiate rent relief agreements with eligible tenants in financial distress due to the COVID-19 public health orders.

In negotiating these agreements, property owners and tenants must have regard to the leasing principles in the Code of Conduct, and the economic impacts of COVID-19.

Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided. Rental deferrals make up the balance.

If parties are unable to come to an agreement, they must first attend mediation to try and resolve a lease dispute before a lessor can take certain actions against the lessee.

For more information, review the Commercial leases and COVID-19 FAQs on the Small Business Commissioner website or call 1300 795 534.

Contact Allan Hall Business Advisors in Brookvale

NSW Commercial Landlord Hardship Fund

Posted on 1 September 2021 | by Allan Hall

Commercial Landlord Hardship Fund summary and guidelines

The Commercial Landlord Hardship Fund provides grants of up to $3,000 per month per retail or commercial lease to eligible small landlords who may experience hardship as a result of reducing rent for their tenant(s) under the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the Regulation).

The Commercial Landlord Hardship Fund will open for applications in October 2021 and will conclude when determined and notified by the State Government.

The NSW Government introduced the Hardship Fund to provide support to smaller landlords whose main source of income is impacted by providing rent relief to retail or commercial tenants and those tenants financially impacted by the 2021 COVID-19 lockdown.

The Fund will provide grants of up to $3,000 per month per tenancy to small commercial or retail landowners, who will suffer hardship if they waive some or all of the rent of a tenant who is financially impacted by COVID-19 in 2021 and have not claimed any land tax relief for rent reductions provided between 1 July 2021 and 31 December 2021.

The Regulation provides:

a moratorium on lockouts and other prescribed actions for the non-payment of rent, outgoings or the non-compliance of business operating hours specified in the lease for businesses that have experienced a reduction in turnover due to COVID-19, and a freeze on rent increases during the moratorium (commencing 13 July 2021)
government supported mediation to help tenants and landlords renegotiate lease agreements (including rent relief) through waivers and deferrals.

Landlords of impacted tenants must renegotiate rent with eligible tenants in good faith having regard to the leasing principles in the Code of Conduct.

Under the leasing principles, landlords must reduce rent in proportion to the tenant’s decline in turnover. This means if a tenant has experienced a 40% decline in turnover due to COVID-19, then the landlord must provide a 40% reduction in rent.

As a default position, at least 50% of any rent reduction must be in the form of a rent waiver with the remainder a rent deferral. Any deferred rent must be paid back over the balance of the lease term or for a period of no less than 24 months, whichever is greater.

A deferral or delayed rent payment is not rent relief for the purposes of this grant. A rent waiver or non-payment of rent from 13 July 2021 must be agreed.

Total taxable landholdings used to assess eligibility for this grant will be those of the landlord or the trust in which a property is held. It will also include property held in Self-Managed Superannuation Funds.

How the program works

Before applying to the Commercial Landlord Hardship Fund, landlords must complete the following process under the Commercial Tenancy Relief Scheme:

Reach an agreement through either mediation or private negotiation with impacted tenants, that complies with the Retail and Other Commercial Leases (COVID-19) Regulation 2021
Obtain tenant’s approval to disclose terms of agreement for the purpose of applying for the Commercial Landlord Hardship Fund grant
Show evidence that the agreed amount has been applied to the month for which the grant is being claimed.

Landlords may then apply for a grant of up to $3,000 per month per eligible property in proportion to their ownership share subject to:

cessation of the Scheme as publicly announced; or
until all funds from the hardship fund have been exhausted, whichever is sooner, and
monthly attestation (for the term of the rental abatement agreement) from the applicant that
- The rental abatement agreement remains in force; and
- All other scheme requirements continue to be met, in particular ongoing financial hardship of both the tenant and landowner.

Applicants must apply online via the Service NSW website from October 2021. All questions in the application must be answered to enable assessment and grant payment.

For eligibility criteria, application evidence, terms and use of funds, please consult the Service NSW website.

Allan Hall can provide assistance to our clients as we have done with previous NSW grant programs. Call our team in Brookvale on 02 9981 2300.

NSW residential tenancy support payment

Posted on 27 August 2021 | by Allan Hall

Apply for the residential tenancy support payment

The residential tenancy support payment is available to eligible landlords who agree to reduce the rent of COVID-19 impacted tenants from 14 July 2021.

Go straight to this website to Apply Online »

Support payments are paid directly into the account of the landlord or their managing agent.

Landlords can separately claim for each rental property they own. If payment is received, a landlord cannot ask the tenant to repay the amount they received.

The amount per tenancy agreement has been increased from the original $1,500 and now capped at $3,000 or the amount of reduced rent from 14 July 2021, whichever is lower.

Note: Currently only amounts of up to $1,500 can be applied for however, from 27 August 2021, applicants will be able to apply for amounts between $1,500 to $3,000.

Applicants that have already applied for $1,500 will need to lodge a second claim of up to $1,500 and provide another completed Rent Variation agreement. You can only claim the further reduction that you’ve passed onto your tenant(s) or the additional $1500.00, whichever is the lower.

The NSW Government is also providing land tax relief for both commercial and residential properties where the tenant’s rent has been reduced. Residential landlords can apply for either the residential tenancy support payment or the COVID-19 land tax relief. They cannot apply for both.

Eligibility

To be eligible for the payment, applicants must:

be a landlord or managing agent
have proof of the residential tenancy agreement(s) with tenant(s) such as:
- a rental bond number, or
- a written tenancy agreement if no bond has been lodged.
have reduced the rent for COVID-19 impacted tenant(s) from 14 July 2021.

For more information on how to apply, including details on required documents for applicants and information for tenants, please visit the Service NSW website.

Allan Hall can provide assistance to our clients as we have done with previous NSW grant programs. Call our team in Brookvale on 02 9981 2300.

New support for NSW commercial tenants and landlords

Posted on 19 August 2021 | by Allan Hall

Mandatory Rent Relief for Commercial and Retail Tenants

The State Government will re-introduce the Mandatory Code of Conduct for Commercial Leasing to mandate rent relief for eligible tenants impacted by COVID-19.

The National Cabinet’s Commercial Leasing Code of Conduct was reinstated by the NSW Government on 13 August 2021.

Under the code, eligible landlords are required to offer rent relief in proportion to their tenants’ decline in turnover. At least 50% must be waivered, and the balance deferred.

The Regulation applies to commercial and retail tenants with a turnover of up to $50 million who qualify for the COVID-19 Microbusiness grant, COVID-19 Business Grant or JobSaver Payment. It prohibits any landlord from evicting or locking out a tenant for lease breaches unless they have first renegotiated rent and attempted mediation.

A new $40 million Hardship Fund will also be established to provide a monthly grant of up to $3,000 for small commercial or retail landlords who provide rental waivers of at least the value of the grant and any land tax relief for which they are eligible.

Allan Hall can provide assistance to our clients as we have done with previous NSW grant programs. Call our team in Brookvale on 02 9981 2300.