Tax Office Targets Rogue Accommodation Operators

Tony RossiterManagement Rights, Opinion

Tax Office Targets Rogue Accommodation Operators

Every year the Australian Taxation Office creates a short list of Taxpayers considered worthy of special attention. Typically the focus is on Industries deemed to be avoiding their fair share of tax and often includes industries such as the building and construction, cleaning and security.

This year the focus has turned to the accommodation providers or more particularly to the Accommodation Sharing Industry.
The ATO has a particular focus on all aspects of the sharing economy and believe that some people using sharing economy platforms are failing to report their income, either on purpose or because they assume their level of activity constitutes a hobby and doesn’t require reporting. The Tax Office focus is to ensure that people renting a room, their home while they’re away or an investment property through web or app based platforms in the sharing economy understand their obligations.
In 2016 there were approximately 2 million individual taxpayers who reported rental income of $42 billion and claimed rental expenses totaling $45 billion. That equates to $3 billion in tax losses being claimed which results in substantial potential lost tax revenue.

In the Tax Office view “there is an increase in people renting homes, apartments, units or rooms via platform sharing sites to generate income. The increased use of these sites means there is an increased risk of people not understanding their tax obligations when it comes to renting out part or all of their property”.

The ATO now has the ability to match the data provided by the rental platforms against ATO records to identify individuals who have not declared their rental income or have over-claimed expenses.

This recent announcement comes off the back of other successful sharing economy data matching programs for the ride sourcing industry which were introduced in 2015.

The main source of data will be the accommodation platforms from whom payments to individuals who rent out short term accommodation are made and/or the financial institutions used by sharing economy platform providers through which payments are directed to platform users.

The type of data obtained will include:

  • The listing owner and property details
  • Financial transactions relating to each listing
  • Property booking activity
  • Financial Institution payment data

The number of individuals affected by this data collection is expected to exceed 190,000 over the time period of the program.
Where the ATO detect a discrepancy that requires verification they will contact the taxpayer – usually by phone, letter or email.

Before any administrative action is taken, taxpayers will be provided with the opportunity to verify the accuracy of the information obtained by the ATO. Taxpayers will be given at least 28 days to respond before administrative action is taken.
For example, where discrepancy matching identifies that a taxpayer is not reporting all of their income, but in fact they are reporting the income under another entity, the taxpayer will be given the opportunity to clarify the situation.

The data may also be used to ensure that taxpayer’s are complying with their other taxation and superannuation obligations, including registration requirements, lodgment obligations and payment responsibilities.

In cases where taxpayers fail to comply with these obligations, after being reminded of them, escalation for prosecution action may be instigated in appropriate circumstances.

The message is clear – more than ever before – it’s important to declare all income earned and be aware of whose name it should be declared in. If you suspect you’ve left income out and you could be caught out, it’s better to do something about that now rather than wait for a please explain by the ATO.

For Accommodation business operators increasingly frustrated by Accommodation Sharing operators potentially operating outside of the rules, this new measure may well see them mend their ways or potentially leave the industry altogether.

GST on Offshore Hotel Bookings

Currently, unlike GST-registered businesses in Australia, offshore sellers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover. This means they are often not required to register for and charge GST on their mark-up over the wholesale price of the accommodation.

Both Australian and foreign consumers are increasingly booking Australian hotel rooms through online services based offshore, which are taking advantage of an exemption designed for offshore tour operators. Removing the exemption will level the playing field by ensuring the same tax treatment of Australian hotel accommodation, whether booked through a domestic or offshore company.

The Accommodation Association of Australia has welcomed the action taken to force offshore online travel agencies to pay their fair share of tax in Australia. Ultimately however the additional GST charged will be paid by Australian Hotels and may simply be passed on to Australian consumers.

The draft measure will apply to sales made on or after 1 July 2019, sales that occur before 1 July 2019 will not be subject to the measure even if the stay at the hotel occurs after this date. Final Legislation on the matter will require the unanimous agreement of all state and territory governments before being passed into law.

The information, opinions or conclusions provided above are generic in nature and do not express individual advice or recommendations. You should always consult a suitably qualified professional before taking any course of action outlined above. Holmans welcome any queries you may have in relation to the above matters.