Anthony Albanese flags tax crackdown on short-term rentals

Anthony Albanese said he would ask the Tax Commissioner to look at the issue of landlords claiming a tax deduction for an entire year when many are leaving their properties empty for long periods.

ATO commissioner Chris Jordan on Wednesday delivered his final address after 11 years in the top job. Picture: NCA NewsWire / Martin Ollman

Anthony Albanese has flagged a potential crackdown on tax breaks claimed by landlords using Airbnb, after concerns were raised that homeowners offering short-term accommodation were unfairly claiming deductions for the entire year when properties are being left empty for long periods.

The Prime Minister’s comments came as outgoing Tax Commissioner Chris Jordan suggested the relatively high top marginal personal income tax rate of 47 per cent encouraged people to “split income and try to get it taxed at the corporate rate, rather than the individual rate”.

Amid a national rental shortage, the prevalence of short-term rentals has become a hot-button issue among voters, particularly in areas with a lack of affordable rentals and which are popular with visitors clamouring for holiday homes.

A caller to Sydney ABC talkback radio on Wednesday asked Mr Albanese why the ATO was not “cracking down on short-term holiday rentals where they are allowed to claim tax deductions for the full year on the property when they’re only renting the property out for a fraction of the year”.

“It’s an obvious and easy thing to fix, to get the tax department to make sure that people are only claiming costs for the time they rent it out, as opposed to getting a massive deduction against their salaries or their wages or other income,” the caller said, adding that “it would have the effect of bringing properties back onto the rental market” by changing the incentives for landlords.

Mr Albanese responded “we have increased resources for the Australian Taxation Office to ensure compliance, but I will raise with the Tax Commissioner the issue that you’ve put forward in a very practical way”.

Addressing the National Press Club in his final public appearance before retiring as commissioner after 11 years, Mr Jordan said: “The difficulty is … how do we know what part of the year it was available for rent, or actually rented, versus the owner using it.”

The ATO was using other sources of data to corroborate landlords’ claims, including from real estate agents, platforms such as Airbnb, and even electricity bills to see whether power was being used at a particular time, he said.

“With us getting statements from property management agents, we can assure a lot of income and a lot of the deductions that they pay, but we do operate a self-assessment system in Australia,” he said.

With the amended stage three tax cuts to be debated in the Senate next week, Mr Jordan was reluctant to be drawn into an opinion on the interaction of marginal rates with the appetite for tax planning.

After Paul Keating called for the top personal tax rate to be ­lowered to 39 per cent, Mr Jordan said “it is a forever debate”.

“Stuff like that – I can’t comment on. It has been written, though … that with the sort of personal rates we have, people do focus on what they can do to split income and try to get taxed at the corporate rate rather than the individual rate,” he said.

“And that has required us to really focus a lot on what’s appropriate now. We can’t change the law. So we’ve got to make sure (that when) people apply what they think is a proper application of the law, (it) is in fact that.

“But people will try to split their income. Some have that opportunity, like small businesses.”

Compared to many similar economies, Australia maintains a high top marginal tax rate, which kicks in at a relatively low income.

Labor’s rejigged stage three tax cuts direct more of the benefits to middle-income workers, at the expense of higher earners, by not eliminating the 37-per-cent bracket and only lowering the top threshold to $190,000.