Program objectives
Our data-matching programs help us fulfil our responsibility to protect public revenue and maintain community confidence in the integrity of the tax and superannuation systems.
The objectives of the residential investment property loan (RIPL) data-matching program are to:
- promote voluntary compliance and increase community confidence in the tax and superannuation systems
- identify and educate individuals who may be failing to meet their reporting or lodgment obligations and help them
- lodge their income tax returns
- correctly report rental property loan interest and borrowing expense deductions in rental property schedules and associated labels of the income tax return
- correctly report net capital gains in income tax returns for properties used to derive income
- gain insights from the data that may help to develop and implement treatment strategies to improve voluntary compliance. This may include educational, behavioural or compliance activities for individuals and businesses that lease or let real property.
Why we look at this data
Sample audits across the individuals (not in business) population were conducted under the Random Enquiry Program. Findings from these sample audits informed the estimate of the net tax gap for the 2020 financial year as being $9 billion, or 5.6%. A significant driver of the gap is the incorrect reporting of rental property income and expenses, with the net tax gap for rental property expenses contributing $1 billion, or 14% of the total individuals gap. A common reason driving the incorrect reporting of rental expenses is individuals incorrectly apportioning loan interest costs where the loan was refinanced or redrawn for private purposes.
One of our strategies to reduce the tax gap is increasing the quantity and quality of the data we collect.
RIPL data provides us information about a rental property loan, like repayments, interest charged and borrowing expenses. We can use this information to identify, assess and treat several taxation risks, including:
- lodgment – confirming taxpayers with a rental property are lodging a tax return and their rental property schedule on or before the relevant due date
- income tax – confirming taxpayers with a rental property are correctly reporting interest on loan and borrowing expense deductions in their rental property schedules and associated income tax return labels
- capital gains tax (CGT) – confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.
For more information on what you can and can't claim for interest charged on your rental property loan, see Tax time toolkit for investors.