ATO Targets Undeclared Rental Income with $1.2 Billion Recovery Effort

The Australian Taxation Office (ATO) is intensifying efforts to recover up to $1.2 billion in missing revenue from landlords who have failed to properly declare rental income.

Tax experts are warning property owners who haven't correctly reported their rental earnings that they could face substantial penalties - including thousands in fines and interest charges on top of repaying any unpaid taxes. Professionals advise concerned landlords to seek immediate assistance if they believe their previous tax returns may be incorrect.

The ATO's expanded data-matching program will cross-reference bond information from all states and the ACT against tax returns. This will help identify cases where landlords haven't declared income from properties with lodged bonds, or where they have potentially misreported their earnings.

"The program helps us identify taxpayers who own an income-producing property, and taxpayers who have sold an income-producing property, who may not be meeting their reporting, lodgement or payment obligations," an ATO spokesperson explained.

While the tax authority has been matching bond data for years, it significantly enhanced these procedures during the 2023-24 financial year. The ATO reports that even less-intensive data collection has proven effective. During the 2022-23 financial year, this program, combined with other compliance strategies, identified approximately 5,600 taxpayers with incorrectly reported rental properties, generating an additional $23 million in revenue.

Previous ATO analysis revealed that nine out of ten landlords were making errors on their income tax returns.

The comprehensive data now being collected includes rental property addresses, landlord and tenant names, rent amounts, bank account details, contact information, lease specifics, and managing agent information.

Tax experts recommend that landlords voluntarily declare any previously unreported income and review past returns if they're uncertain about their accuracy. The ATO may waive penalties or interest charges for taxpayers who come forward before being contacted by authorities. Making a voluntary disclosure before being approached by the ATO can help avoid formal action.

For individual landlords who have failed to declare any rental income at all, penalties could reach thousands of dollars, while minor overclaims will result in less significant consequences.

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