ATO crackdown: Investors, workers targeted ahead of 2023 tax time

Taxpayers could be in for a shock this tax time, as the Australian Taxation Office taxes aim at dodgy claims in three key areas.

Millions of Australians will see their tax reductions shrink by as much as $1500, as the Australian Taxation Office cracks down on rental property investors after a shocking number of incorrect returns were uncovered.

ATO Assistant Commissioner Tim Loh told The Australian that regular reviews on property investors’ deductions found as many as “nine out of 10 returns were incorrect” as the tax watchdog unveils its three key focuses for tax time 2023.

“(It) is a really unacceptable rate,” Mr Loh said.

“We are really focused this year on making sure rental property owners and their registered tax agents understand their obligations.

“We are going to be increasing our activities in this area.”

Using a new data-matching protocol, the ATO will crosscheck claims made by rental property investors in 2023 with financial information provided by 17 of the country’s largest mortgage lenders.

ATO Assistant Commissioner Tim Loh has announced a crackdown on rental property owners. Picture: Supplied

The ATO also warned that income-producing portions of residential properties – such as rooms on accommodation platforms like Airbnb and Stayz – could create capital gains tax issues amid the new crackdown.

The changes come after the Treasury seeks to reclaim $9.1bn in unpaid taxes over the next five years, including from the millions of working Australians who have been warned to expect lower tax refunds this year.

ATO will sharpen its focus in 2023 on capital gains tax and work-related expenses, including changes to work-from-home claims.

From March 1, taxpayers claiming work from home-related deductions will be required to provide more detailed documentation.

The change follows the cessation last year of the Covid shortcut, which had helped calculate claims.

Mr Loh warned taxpayers against simply “copying and pasting” last year’s claims.

Australian Treasurer Jim Chalmers MP announced plans to reclaim $9.1bn in lost taxes. Picture: Glenn Campbell

“We know a lot of people are working back in the office more compared to last year,” Mr Loh said.

“I think we have been pretty transparent in communicating the changes to the working-from-home deduction methods.”

The recent cut to the Low and Middle Income Tax Offset is also expected to lead to lower tax refunds and increased debts in 2023.

Tax agents will also be in the spotlight after the ATO claimed they dropped the ball in recent years.

About 87 per cent of rental property owners use registered tax agents.

In their official advice, tax agents H & R Block warned property owners to ensure they kept good records ahead of tax time 2023.

“The golden rule is that if you can’t substantiate it, you can’t claim it,” the tax agency said.

“It’s essential to keep invoices, receipts and bank statements for all property expenditure as well as proof that your property was available for rent, such as rental listings.”