The Australian Taxation Office (ATO) has initiated a comprehensive effort to identify and address tax evasion among property investors, targeting 1.7 million landlords. As part of this data-matching program, the ATO will obtain residential investment property loan data (RIPL) from 17 major banks, allowing them to scrutinize rental income declarations, capital gains tax compliance, and the accuracy of deduction claims, such as rental property loan interest.

Though the ATO has not released an official media statement or public announcement, its website provides information on the RIPL program’s objectives and rationale. The ATO’s investigations into individual tax compliance have led them to estimate a net tax gap of $9 billion, or 5.6%, for the 2020 financial year. The organization attributes $1 billion, or 14% of the total individual tax gap, to the incorrect reporting of rental property income and expenses.

The ATO aims to achieve the following through the RIPL program:

1. Encourage voluntary compliance and foster public trust in the tax and superannuation systems.
2. Identify and educate individuals who may not be fulfilling their reporting or lodgement obligations, assisting them in accurately filing income tax returns.
3. Ensure correct reporting of rental property loan interest and borrowing expense deductions in income tax returns.
4. Accurately report net capital gains in income tax returns for income-generating properties.

In the 2019-2020 financial year, around 2.4 million individuals claimed $51.3 billion in rental deductions, resulting in an estimated $18.6 billion tax bill reduction. Approximately 1.3 million people experienced a rental loss, or negative gearing, which led to a cumulative rental loss of $10.2 billion and a tax bill reduction of about $3.6 billion.

The ATO has identified the most frequent errors in rental tax deductions as: improper or absent apportionment of loan interest costs following refinancing for private purposes; claiming costs as repairs instead of capital works deductions; and failure to apportion expenses for private property use.

Landlords disputing claims made by the ATO based on the obtained data will have a 28-day window to respond. The financial institutions from which the ATO will gather data include Adelaide Bank, ANZ, Bank of Queensland, Bendigo Bank, Commonwealth Bank, Bankwest, ING, Macquarie Bank, National Australia Bank, Suncorp, Westpac, RAMS, Ubank, St George, Bank of South Australia, Bank of Melbourne, and ME Bank.