EOFY statements come out and you are hit with a barrage of emails and phone calls from confused Landlords.

Sound familiar?

There are generally two key reasons why this may be.

And luckily, both have an easy fix (aka explanation).

  1. Reported income on the financial statement may not match what the ATO sees
  2. Reported income on the annual statement from the Agency will not match what hits your bank account.

Let’s delve into why this is and the way you can explain it to your Landlords.

It’s called the introduction of the new ATO Proprty Management data matching system.

It’s due to this new data matching system that your EOFY statement may not accurately match what has been deposited into your account.

The ATO Property Management data matching program

Most people claim their deductions correctly come tax time. However, there is a risk that some taxpayers may over-claim their rental expense deductions in the rental schedule within their tax return in the hope of receiving a larger refund.

The ATO collects and matches the data from property management software providers against ATO records for the following 3 reasons:

  1. inform rental property owners of their tax obligations as part of an information and education campaign
  2. undertake compliance activity to protect the integrity of the tax system and ensure that everyone pays the correct amount of tax
  3. inform designs that will make it easier for our clients to interact with the system and get their affairs right.

They look specifically at property management data to address some taxation risks including:

  1. income tax – confirming correct reporting of rental income, rental-related income, rental expenses and associated deductions
  2. capital gains tax (CGT) – getting capital gains right when selling properties used to generate income
  3. lodgment – ensuring owners of rental properties are lodging tax returns.

Data collected include general property owner contact details, rental property details and Property Manager details, covering up to 1.6 million individuals annually.

The program is designed to ensure individuals and businesses are fulfilling their tax and superannuation reporting obligations and to identify and educate those individuals and businesses who may be failing to meet their reporting obligations and assist them to comply with lodgment of tax returns, correct reporting of rental income and associated deductions and capital gains tax obligations.

So if you have concerned calls from your Landlords about the discrepancy, we hope this information can assist!

More info can be found on the ATO website.

Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 26 years’ industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.