New Extensive ATO Data matching program

We sold an IP which was under 6 year rule. What documents do I need to keep to avoid any trouble from ATO?

 

The ATO merely use license, electoral roll and other details against addresses. Remember the states get Govt funding from GST and its in their interests to hand as much info to ATO as they can accept.

The ATO find Mr and Mrs Smith living in the property owned by Mr Jones. Bingo. Perhaps through school records too ? ....So its becomes a case of please explain. But they wont tell you they know about the Smiths. They just ask "was it 100% owner occupied"...You say Yes. Thats lie #1. Then they ask who Smith is. You are now in a deep hole.

 

1. Evidence it was occupied as you main residence from date acquired AND
2. Evidence where you lived when moved out.

Must be retained for at least 6 years AFTER its sold. In some cases that could be a lifetime.

 

They certainly are doing more compliance work around property sales and the like. Shares are on that list too i believe, although they do get some limited information on this already.

We recently received a letter from the ATO for a client which basically said; so.. we know you sold this property at xx Smith Street on xx/xx/2014. Why haven't you declared this in your tax return? This was fairly simple to answer as it was reported in his business schedule as income as runs a flipping business, but it highlights that they are starting to follow up more of these.

We also had a letter for Revenue SA stating that a client was running a business from home, and here is a land tax assessment for the financial year. So it seems to be working both ways between state government organisations and the ATO.

 

The information sharing is only growing as it becomes easier to do with electronic records of everything.

Not property related but the ATO will also have access to off market share transfers from 1 July 2017 (iirc, might be 2016), another area a lot of people loved to do the dodgy on.

The other property thing to watch out is that they are actively targeting rental properties located in "holiday areas" to ensure there is no private use that just so happens to not be included as well as a bunch of other things (like that it was available for rent at all times). So if you have rental properties in those kinds of regions it's very much worth making sure your record keeping is spot on.

 

thank you for you reply!
I'm confused and so does my friend, 1st property really should be paying CGT upon sale,right? (it's sold 2 yrs ago), but no rental records on it as my friend was living in it and she gave to her son to live in it....the accountant already calculated the CGT on this ppty but didn't declare it on that assessment, told my friend it's legal to do so..., what you are saying makes sense, maybe accountant is treating it exempt from CGT and wanting to use the 2nd property for CGT, but 2nd ppty has always been their PPOR since the date they purchased it, and they have no plan for selling it at all....(may give it to the son one day after they passed away. another 30yrs.), and my friend also told the accountant their plan...I'm guessing the accountant is just lazy to work out CGT on the 1st property, as there is a 2nd property to be the backup...
my friend has no idea of CGT but only to trust her accountant....the accountant in this case is not really helping her to decide which property should be liable for CGT, as to which one has the lowest CGT to pay. the first property was purchased 23 years ago, if it's liable for CGT, then there are lots of work to work out the cost base, etc....(interest paid, etc etc), and documents to prove they were living in it (I don't think there are any records from 20 yrs ago)...i guess accountant is not dodgy but can be quite irresponsible...

 

The PPoR allocation is actually a decision that you can make at any point in time and if they've told him they have no intention to sell the current property then the decision to treat the other one as the PPoR actually makes a lot of sense and is more than likely the best decision.

Essentially it's the main residence when they moved in, if it never earned income then they can actually keep it as the main residence property for as long as they want, it just means they will pay CGT on the current property for the period where ownership overlapped because you can't have the two main residences (there are special circumstances where you can but this isn't that scenario) and that CGT will be apportioned. If they never sell the property that will become an estate type issue down the road, the longer they own it the smaller that portion becomes obviously as well.

There is a good chance that the capital gain on that property would be more than the next one, you also would consider whether they're working currently and would likely be retired when selling the current one if they did sell it, capital gains is added to other income so might push them into higher brackets or would be taxed at highest if already in that bracket but when they retire the gain may be taxed at a substantially lower rate.

From what you've described I actually think the accountant has probably made the best decision for the circumstances (obviously I don't know the minutiae) so I don't think the friend really has any thing to worry about. Just know to keep a record of when they purchased the current place and when they sold the previous place as that overlapping period will have CGT apportioned to it.

 

Interesting that the Newspaper article chose to comment on overseas owners , but there's nothing in the press release to indicate that's who they're targeting . For every illegal overseas owner , I'm sure there are many upstanding Aussies who will be slightly nervous once they read this .

Given how far they're going back , one wonders how many people will be chatting to their accountants about amended tax returns .....

Cliff

 

I'd be far more worried as an Aussie than overseas, chasing down the overseas folks is a genuine pain in the ass, basically has to be a country with a double tax agreement that includes a clause to allow mutual tax collection from them otherwise it's going to cost more in a significant amount of cases to chase it down than they'll make from it.

The Aussie on the other hand is a simple letter saying please explain or you're getting a default assessment and then the burden is entirely on the taxpayer.

Using Australia's world renowned xenophobia as a selling point is just clever politics/marketing really, make a change that will impact Australians more than anyone and say it's aimed at collecting tax from those dodgy foreigners and the Australians rejoice without reading the fine print...

 

Offshorers arent worth the chase BUT they get done in a few different ways:
1. The get flagged on DFAT computers so if they come for a visit they get an interview at the airport;
2. The ATO can share ifo with the offshore tax agency ie IRS (USA) if we have a agreement to share data. AU would allow the US to explore the problem.

 

Paul

Presumably if they do have Aussie holdings , those can be got ....

Cliff

 

Offshore people can be bankrupted by the ATO for any debts owed over the minimum amount ($10k i think for individuals). Any Aussie assets can be taken and overseas assets can also be taken, but it it much harder and more costly to do this.

 

And I believe the laws will be changing soon to require purchasers to withhold 10% of the purchase price and remit this to the ATO where the owner is a non resident.

 

I hope the proposed data matching is better than what they can do with current fully matched data.

I got a notice to lodge my last tax return after the assessment had already issued. The lodgement notice did state please disregard if already lodged. But hey, I thought they could do better than that. And yes I did lodge on time.

 

The planned threshold from 1 July 2016 excludes most property !! $2.5m is high. In US it has no threshold.

More important has been the need for buyers and sellers to provide 100pts identity as there was a identified black market issue where a property could easily be registered in a random name and a fake identity mask detection. Apparently a issue detected in OMCG and drug trafficking raids and fell outside the money laundering and counter terrorism rules for banking and financial services. Tightening integrity over ownership makes sense.

 

Not if they self manage,and all the bills are in their name,and rent within the family network in cash-this is very more common ,some people are good to see trends before other people till reality hits..

 

I received a 'please explain' letter a couple of years back. Not in relation to property though.

As I had moved out of Australia I declared non-residency. The data matching picked up funds coming into Australia in excess of my declared Australian income.
The letter basically said - "you have declared income of X, however, the attached transfer records show income of X+Y. Therefore your new assessment is X+Y, you owe tax on this amount - you have 2 weeks to dispute this or be liable for the tax. Ps - this assessment is from 4 years ago, and you will be liable for taxes on X+Y up until the current date.
Kind Regards"

It took me 12months of backwards and forward with the ATO, plus about $10k in accountancy fees , for the ATO to decide "ahh yes... we now see you are non-resident and have declared all income and paid all tax you are liable for - carry on as you were"

Yah... thanks for that!

Blacky

 

Excellent, it is about time they widen the net. I hope they manage to catch out the many that have been doing the wrong thing for years, and continuing to up the ante when never caught out.

Cash in hand rentals, and ppor rorting could gain hundreds of millions in lost tax revenue.

 

Properties are rented through real estate agencies (and utility bills in tenants names) but the ATO doesn't detect or cross reference this income since it is not reported to them like dividend and interest income are. Perhaps the rental bond or utility bill cross referencing will detect these scenarios in the future but whatever detection methods they have at the moment don't work too well. Doesn't seem like it would be too hard to do, easy money for the ATO.