ATO issues guidance to landlords, foreign investors this tax season

The Australian Taxation Office (ATO) is calling for landlords to be mindful of their tax filings this upcoming tax season and reminded foreign property investors of the rules they need to be aware of before breaking into the Australian market.

The ATO set out four key areas this year, which include a focus on landlord-related concerns such as rental property income and capital gains from crypto assets, property, and shares.

ATO assistant commissioner Tim Loh reminded landlords to include all the income they have received from their rentals in their tax return, including those from short-term rental arrangements, insurance payouts and even the rental bond money they retain.

“I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance,” he said.

“If we do notice a discrepancy, it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return.”

The tax office, Mr Loh said, will be requesting for supporting documentation for any claim landlords make after the notice of assessment issues.

Meanwhile, the tax office also reminded property sellers to calculate their capital gain or capital loss and record it in their tax return. The reminder also goes for crypto traders.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages” Mr Loh said.

“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations.”

Warning to foreign property investors

The tax office also issued a reminder to foreign investors in the property market about the tax rules.

ATO assistant commissioner Keir Cornish said there are limitations as to what foreign property investors can buy in Australia under the Foreign Acquisitions and Takeover Act 1975 (FATA).

“Breaching the FATA can lead to civil penalties, enabling the government to recapture the capital gain or 25% of the property value, whichever is greater,” he said.

In July 2020, the ATO filed proceeding in relation to six breaches of the FATA against a foreign property investor for failing to secure permission from the Foreign Investment Review Board.

The foreign investor was fined $250,000 for buying several properties in Melbourne without approval.

“We welcome this decision as it is the first penalty decision under the FATA — this serves as a clear deterrent to other foreign investors who believe they can operate outside of the law,” Mr Cornish said.

“We promote voluntary compliance, but if investors aren’t aware or flout the rules, enforcement action is taken.”

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