You may already be aware of the ATO data matching program and its ability to identify income received during the financial year. To date, wage and salary income, interest income and dividends have all been identified by the ATO. They have also been working hard to identify when assets have been sold. Capital gains events such as property and shares sales are now often reported to the ATO with the relevant dates, quantities and amounts. Their attempts to match cryptocurrency events, although vague are set to improve.

As announced in April 2023, the ATO announced a date matching program in conjunction with 17 banks (including the Big 4) where they will be matching property data including purchase history with current loans and the transactions that have occurred during the year starting with the 2023 financial year. A large focus of the ATO each year revolves around loans that are partly private in nature, where interest is being claimed incorrectly. At WSC Group, we have always stressed the importance of being able to identify where borrowed money has been spent and being able to prove what interest claims are deductible. The ATO have historically relied on tax agents to ensure that the figures being claimed are correct. With a greater increase in loans being refinanced with different banks, it is understandable why the ATO is looking so closely at this area.

The ATO’s estimates based on the 2020 financial year is that there is net tax gap of $9 billion just for individuals. The risks surrounding rental properties contribute for 14% of this. This is around $1.26 billion. The data obtained by the ATO won’t just be total interest paid for the year, but will include opening and closing balances as well as total repayments, loan term and initial balances. Even the original costs incurred to setup the loans will be matched.

While we don’t expect this data-matching to be perfect in its initial stages, the ATO will now have more levers to pull when it comes to asking questions around the deductibility of loans. The ATO has assured us that the program is intended to “promote voluntary compliance” allowing the taxpayer to correct any mistaken claims, but is yet to confirm what that process will look like.

With the ATO now matching loan data, we are hoping that this will be provided to tax agents as part of our tax return prefilling process in the same vein as salaries and dividend income currently, however it is yet to be confirmed how or what form it will take. Regardless, you will still need to ensure that you are keeping clear records of all investment loans whether open, closed or refinanced. As always, if you are in any doubt about your own affairs or have any concerns, please contact us to discuss further.