Work expenses, omitted income and rental property claims have been identified as primary targets by the ATO to narrow the $8 billion gap between what individuals pay in tax and what the Tax Office believes they should pay.
According to ATO Second Commissioner Jeremy Hirschhorn,
“ This year, we estimate that individuals are paying about 94 percent of the tax they should be at lodgement. The three focus areas would be subject to increasing data scrutiny with special attention on the 90 percent of rental claims that needed adjustment.”
Hirschhorn said, “First we need to create a common community understanding about what is an allowable work-related expense claim. Incorrect claims in this area account for almost $4 billion of the tax gap — almost half the total tax gap related to individuals.”
He stated the second problem area was omitted income, particularly cash wages and income from the sharing/gig economy which the ATO estimate to be worth $1 billion a year in unpaid tax.
According to Mr. Hirschhorn, the most problematic category was property investments, “Which covers the full spectrum from true investment properties through to holiday homes which are occasionally rented out. We estimate this contributes about $1 billion to the net tax gap. In our work today in relation to 2021 tax returns, over two million rental property owners declared over $45 billion in income and about $43 billion in expenses. The random inquiry program that we applied to those claims that helped determine our estimate of the tax gap showed that nine out of ten returns reporting net rental income require an adjustment. This is startling and clearly something we need to address.”