ATO ramps up landlord crackdown using rental bond data

The ATO is ramping up its scrutiny into millions of landlords’ tax affairs to catch those who fail to lodge returns and misreport income and capital gains on their rental property.

It will collect the rental bond details of around 2.2 million individuals from state and territory regulators to expand its data-matching program, according to a government gazette notice last week.

The ATO said the data would be collected twice a year between 2023–24 and 2025–26 and be used to identify non-compliant landlords, promote voluntary compliance and improve risk models.

Data matching is already widely used in the rental sector. In August, the ATO acquired property management data records of 2.3 million landlords from software companies, expanding on an initiative that began in May 2021.

The ATO said it was interested in reviewing rental bond data because it allowed it to identify and clamp down on taxpayers failing to lodge returns and reporting errors.

“The rental bond data-matching program will allow us to identify and address tax risks,” the ATO said. "Taxpayers with a rental property may fail to lodge a tax return and their rental property schedule on or before the relevant due date”.

Other issues included landlords who omitted or incorrectly reported income and deductions in their rental property schedules and income tax return labels, or omitted or incorrectly reported cost base elements when calculating their rental property’s net capital gain or loss.

The data would also be used to examine non-resident landlords who needed to meet conditions such as those imposed on foreign investment approvals, the use of a dwelling and vacancy fees.

“The objectives of this program are to identify and educate individuals and businesses who may be failing to meet their registration or lodgment obligations and help them lodge their income tax returns, correctly report assessable income from a rental property in their individual income tax return, correctly report associated rental deductions in their individual income tax return and comply with capital gains tax obligations,” the ATO said.

Data collected would include names, addresses, phone numbers and bank account details for landlords, tenants, and managing agents.

Additionally, the ATO would collect rental bond transaction details, such as property addresses, lease periods, commencement and expiration dates, bond amounts, rent payable and payment frequencies.

The dataset would also cover property characteristics like dwelling type and number of bedrooms, as well as bond numbers, lodgment dates, statuses, refund amounts and records of unclaimed bonds.

According to the ATO's website, its data-matching process involves over 60 identity-matching techniques to ensure the correct taxpayer is identified from the third-party data.

The ATO said it expected the rental bond data quality to be of a “high standard” as regulators used sophisticated computer systems to administer state and territory tenancy laws.

It added that it usually retained the data for a period of seven years but the timeframe could be extended based on reviews conducted “on a rolling basis at intervals of no longer than seven years”.