ATO data matching – how does it affect you?

The Australian Government has a goal of being ‘digital by default’ and even has a Digital Transformation Office. One of the agencies marching ahead along the digital path is the Australian Taxation Office. In recent times the Australian Tax Office has let go of thousands of employees to invest further in technology.

What is data-matching?

Every year the Australian Tax Office uses more data matching technology than the previous year. The ATO utilises data matching to monitor and enhance compliance of businesses and individuals, as well as to help detect fraud against the Commonwealth. How do they do it and how does it affect you?

Data matching is the ATO’s way of taking in data/transactions from banks and other institutions to analyse and compare transactions with various tax lodgements, which allows the system to highlight any exceptions or outliers that warrant further investigation. The data received by the tax office comes from many sources and includes:

  • Banks and foreign financial institutions
  • Private health insurers and general insurers
  • State Revenue authorities
  • State Land Title offices
  • Super funds
  • Online trading platforms
  • Any other source the ATO deems to be relevant

ATO areas of focus

At the time of writing, the ATO is conducting 23 ‘protocols’ or data matching programs. These range from taxable government grants to online selling to the Australian Electoral Commission and includes ‘Real property transactions 1985 – 2017’.

Data matching can apply to all tax returns submitted including individuals, partnerships, companies and trusts. It is particularly relevant for businesses that operate in industries where off-the-book transactions have traditionally been the norm and the ‘cash economy’ has been strong.

A recent example of a data matching program is the ATO accessing data from websites like eBay to find users with frequent sales and aggregate sales above $10,000 to try to identify businesses not declaring their income and paying tax on profits.

Ride sharing (Uber) targeted

Another industry where the ATO is focussing their powers is the growing world of ‘ride sharing’, which most people will recognise as Uber drivers. Ride sharing services like Uber have been a revolution in Australia, particularly after getting the greenlight from all states except Tasmania and the Northern Territory. The ATO has picked up on this and has explained how they plan to use their data matching systems to ensure drivers remain compliant to tax law. The ATO plans to work with financial institutions including PayPal to identify receipts from ride sharing companies. They will then compare these records against those declared on an individual’s tax return to ensure that all income from this source is being declared. They have already issued numerous letters to registered Uber drivers specifying how much income they expect to see declared. There are also GST implications of ride sharing income.

Less will slip by the ATO over time

This entire process is automated to allow the Tax Office to check as many data sources as they can as quickly as possible. As this system is used progressively more each year, it will be refined to allow the ATO to check everything they can with less and less slipping through the cracks.

When the ATO determines that they want to investigate a matter further it may trigger an audit, which can evolve into a serious process.

By Gareth Livingston, Accru Melbourne

If you need assistance with the reporting of income on your tax return, please call your local Accru advisor.

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