Given the growth in the SMSF sector and the increasing popularity of strategies such as limited recourse borrowing arrangements (LRBAs), H&R Block has tipped that property will remain a top priority for the ATO’s compliance work in the SMSF sector this year.
“I know the ATO always keeps a close eye on property investment and especially LRBAs,” H&R Block's director of tax communications, Mark Chapman, told REB’s sister title, SMSF Adviser.
The ATO foreshadowed in an announcement late last year that LRBAs could be an increased area of focus in 2016.
This particularly applies to related party borrowings which may currently be structured on non-commercial terms, with the deadline to have these structures rectified being June 30.
Speaking more broadly, Mr Chapman believes the ATO will continue to insist on monitoring compliance regarding rental property income and deductions, following the 2015 campaign which saw 500 postcodes issued with warnings that urged holiday home owners to ensure deductions were not made during periods in which a property was not available for let.
“With property rental a valuable source of extra income for millions of taxpayers, it can be expected that the ATO will follow up with some targeted reviews and audits this year,” Mr Chapman added.
He also noted that the ATO will up the ante regarding a crackdown and investigation into the ‘sharing economy’, “driven in part by the high levels of non-compliance amongst those driving for Uber or renting rooms through Airbnb”.
“The ATO was caught unawares by the growth of the sharing economy and has had to play catch-up to avoid being left behind in terms of tax collections and voluntary participation,” noted Mr Chapman.
“They’ll now want to make up for lost time and make their presence felt.”
[Related: ATO probing 30 years of real estate deals]