ATO finds 6000 property sales that may have skipped paying tax
The tax office is chasing the owners of 6000 investment properties sold across the country in the five years to mid-2025 who failed to lodge a tax return disclosing the results and could owe tens of thousands of dollars each in capital gains tax.
The discrepancies – which could total $66 million, although the Australian Taxation Office has not officially put a figure on it – are the result of the ATO’s increasing use of technology to cross-reference information from a wide range of federal, state and territory records, including property sales.
Profits or losses made on the sale of an investment property must be disclosed in the owner’s income tax return the year a property is sold as any profit is subject to capital gains tax.
ATO assistant commissioner Anita Challen said the taxpayers were identified using data matching.
Assistant commissioner Anita Challen said the ATO does not have an estimate of the tax potentially owing; however, based on 2023-24 ATO data, the average net capital gain was $30,644 and the average CGT payable was $11,031 per taxpayer, which would suggest the potential outstanding tax bill across 6000 properties to be about $66 million.
This aligns with previous enforcement activity in this area. According to its website, in the 2016-17 financial year, the ATO identified “over 5431 cases where real property dealings were not treated correctly, raising an additional $65 million in revenue”.
Challen said the ATO identified the outstanding tax returns as part of its “ongoing compliance and assurance activities” using data matching, where it cross-references information against various data sources to identify anomalies and instances where tax may be owing.
It found that between July 1, 2020 and June 30, 2025 about 6000 properties had been sold and the owners had failed to lodge an income tax return disclosing their profit or loss.
“We receive income data from a range of organisations such as banks, state revenue offices, land titles offices, motor vehicle registries, insurance companies, share registries, sharing economy platforms, and crypto asset exchanges – to name a few,” Challen said.
Challen said while “most taxpayers try to do the right thing, property rules can be complex, and errors can occur even where there is no deliberate attempt to avoid tax”.
Robyn Jacobson, senior advocate at the National Tax and Accountants’ Association, said while some of the taxpayers may have been deliberately trying to avoid tax, others may be retirees who have not had to lodge a tax return for years, or foreign residents who have sold an Australian property and were unaware they needed to lodge a tax return.
The sale of a property does not necessarily mean tax is payable as some taxpayers may be eligible for exemptions or concessions, but “a net capital gain triggers a lodgment obligation whether or not tax is payable”, Jacobson said.
Properties sold that were identified as principal places of residence – which are exempt from CGT – were excluded from the ATO’s compliance work.
As a first step, the ATO is sending letters to the taxpayers giving them the opportunity to lodge a tax return for the period covering the property transaction by October 31, or to dispute the ATO’s information before further enforcement actions is taken.
“Where taxpayers do not engage with us or fail to take action, we may consider further compliance activity in line with our normal compliance processes,” Challen said.
“Ignore the letter and the ATO can issue a default assessment on its own estimate,” Jacobson said.
“The onus then reverses; the taxpayer must prove not just that the ATO’s figure is wrong, but what the correct figure is. Without records, that can be very difficult. A default assessment also attracts a penalty of 75 per cent of the tax,” Jacobson said, adding that interest charges could also apply.
Changes to CGT were announced in May’s federal budget with many property investors likely to face higher tax bills after the changes begin on July 1, 2027.
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