Paul Glossop: Welcome guys to Pure Property Investment one on one. We’re here today with Jeremy Iannuzzelli. Jeremy is a partner at Keshab Chartered Accountants. He’s also a passionate property investor himself. Today we wanted to talk about something which is probably a bit out of my remit and probably a lot more in your wheelhouse Jeremy. And that’s about an ATO benchmarking and data matching. And it’s probably an important factor to understand when you’re going to be claiming certain expenses and financial years and probably making sure you know what you need to know when your accountants giving you the right advice at the right time as well. So, Jeremy if you don’t mind elaborating a little on that.
Jeremy Iannuzzelli: Of course. Thank you very much. Look the ATO have become very sophisticated with their benchmarking software. They’ve spent a lot money developing that software and ensuring that that software does catch out the people who are trying to dodge the system. So, what we as accountants have been advised by the ATO is what make sure that your clients are claiming the appropriate expenses, claiming expenses appropriate to their occupation. Are claiming expenses appropriate to their investment property? What the ATO does have is a huge amount of resources and huge amount of data collection. And I suppose a computer sifts through that to really find the person who is claiming the most in that category. And then more so going on to a computer generated software system which then sends out a letter and request you to have all your information. If you’ve claimed everything accordingly and you’ve got the receipts you’ll have no issues.
The ATO do recognize that some people do have different expenses for different occupations. But more so it’s really out there to catch the people who just subconsciously putting some figures which don’t tend to marry up with the receipts that they’ve got. From a property investment side of thing it’s become very sophisticated. So much so that they really trying to check the people who are on Airbnb, the people who are on the holiday lettings or home stay. The people who are renting out to the family members is very important. And what the ATO says is “Well, we do expect a certain amount of rent to come in versus a certain amount of expenses to be paid out for that particular property based upon properties which are either next door or next street or in the next suburb.” So very sophisticated software systems. And they there really to catch the people who aren’t disclosing all the income or potentially renting that particular property to a family member at below market value rent but claiming all the expenses at market value rate such as the full rate of council rates, water and interest.
And the ATO’s there to stop that and say “If you are getting below market value as a gesture of good will you’ve provided to your family, we expect you to downsize those amount of expenses that you’ve paid because it’s not a market value. There is a private portion involved.”
So that benchmarking and software system is becoming very sophisticated and it’s something I’ve seen quite a bit so much so now the ATO are indicating to the accountant that “Your client has claimed above normal expenses for their occupation” and if they do choose to claim the similar type of expenses, us as the ATO do have the right and probably will audit you in the future. So as an accountant as a property investment professional our advice needs to be very sound and we need to make sure that the clients are doing the right thing because we do talk about running this as a business. And the last thing as a business we want is to be spending our time reviewing our information with the ATO. We want to make sure we do everything right and we go ahead and spend the time we were supposed to which is building our wealth and going through life efficiently.
Paul Glossop: “A stitching time saves nine” as the saying goes. And I think it’s a bit of a surrogate to the digital age isn’t it really? I think from the ATO’s perspective, they’ve kind of fallen into the opportunity now and every tax collecting revenue stream in the world. The fact that the cash economy is kind of almost dead. So that basically leads into the fact that there is data for everything now. So your bank account statements, people paying you directly to bank accounts. If you not going to disclosing them, you will get caught out.
I think ultimately the idea is to make sure that everything you do is done in a way that’s formally, that’s documented and you don’t try to get around the ATO because they will find you. And you really want to make sure that you running the business as legitimately because what you want to be is a long term investor who doesn’t have a red flag every time you put your claim into the ATO. So you want to be someone who is squeaky clean, make some profit, invest strategically and get some right advice before hand.
Jeremy Iannuzzelli: And I suppose the biggest thing now is the, you know, the rise of the Airbnb. What people are doing, I have seen, they do Airbnb their house and then find a sneaky way to go up there and spend some time in the summer months or in the winter months depending where you are and the ATO are really trying to find that and where they finding that? By seeing what the electricity rates were and the water and the gas and you know they are marrying that all up. So it is becoming very intricate the way they doing things. So it’s a good little I suppose clause to look out for the future.
Paul Glossop: Mate, great insides as always. Thank you very much. Guys if you would like to get in touch with Jeremy for any reason, feel free to give him a call. His number is at the bottom of the screen. You can contact us anytime as well, my details are at the bottom of the screen as well as. And look no doubt, see you very soon. Cheers!