NEW data matching capabilities will ensure taxpayers don’t leave out income or inflate deductions this tax time, according to the Australian Taxation Office (ATO), with rental property deductions a key focus for the agency.

THE ATO collects data from a series of sources, including government agencies, financial institutions, insurance companies, and financial service providers to ensure that people and businesses comply with their tax and super tax obligations.

“This isn’t a game of Guess Who, as our sophisticated data-matching programs provide us with all the clues we need to track down taxpayers with incorrect information in their tax return,” ATO assistant commissioner Tim Loh said.

“We will use this information to identify and educate taxpayers who have made incorrect claims in their return, with a longer-term plan to pre-fill as much information as possible in future years.”

Mr Loh confirmed two new data-matching protocols start this year for rental investors, including investment loan data and landlord insurance policy information.

“Around 80 per cent of taxpayers with rental income claimed a deduction for interest on their loan, and this is where we’re seeing mistakes,” he said.

“For example, you can’t refinance an investment property to buy personal items, like a holiday to Europe or a Tesla, then continue to claim the interest expenses as a tax deduction.”

With the new landlord insurance data-matching protocol, the ATO is reminding taxpayers that insurance premiums paid for rental properties can be claimed as a tax deduction.

Similarly, any insurance payouts received in relation to an investment property must be reported as income.

“This new data provides us with crucial intelligence to paint a picture of what’s true and accurate in tax returns,” Mr Loh said.

The ATO will also be receiving data from electronic distribution platforms that provide taxi services, ride-sourcing and short-term accommodation, ensuring income earned through the sharing economy is properly taxed.

According to the ATO, the information from platforms will be matched against what is reported in tax returns or activity statements.

“While the ATO has received data from a number of digital platforms in the past, this legislative change means more platforms will be required to regularly report into the future” Mr Loh said.

“These new rules will give the ATO clear visibility of people who are earning income using these platforms.”

The new income protection data-matching protocol was also published this month, meaning the ATO will know premiums paid for income protection insurance policies as well as payouts received.

“You can generally claim a deduction for income protection insurance you buy, but remember you can’t claim the deduction if the insurance policy is paid by your super fund,” Mr Loh said.

“If you receive an income protection insurance payout from either your personal insurance policy or from your super fund policy, you must include the income in your tax return.”