ATO Data Matching

See what the ATO knows about you.

It might be hard to believe, but the ATO knows more about your tax liabilities before you even get around to lodging your income tax return. Banks and other financial institutions have a legal obligation to collect and send information to the ATO, including interest income, dividends, land title transactions and other transaction data. But it doesn’t stop there!

The ATO also has the power to collect information from many companies you might think are outside the ATO’s data collection powers. Michael Carter, tax expert at thebusinessexperts in Melbourne says: “Clients who are using online marketplaces like eBay, Airbnb, and Uber to generate additional income are finding the ATO are using data gathering powers to request information about the transactions for Australian taxpayers. Failing to report income from these activities is almost certainly going to be detected by the ATO.”

With the rapid changes in technology, the ATO is now able to collected and process vast quantities of financial information. Even your insurance company is required to report assets purchased by you to the ATO for review.

How are they using this information?

  • Did your business recently purchase a luxury car? Then make sure you are reporting or paying Fringe Benefits Tax;
  • Did you purchase a property? Then make sure you can demonstrate how it was paid for;
  • Did you purchase a boat, caravan or other leisure asset? Then make sure your taxable income shows the ability to afford such assets;
  • Did you develop and sell property? Then make sure you have complied with the GST and capital gains tax requirements;
  • Did you gift an asset? Then make sure there is no capital gains tax payable;

These are just some of the endless list of events the ATO already knows about and you can’t risk not disclosing.

Think you have rights to privacy, then think again. If the ATO requires the information for the integrity and administration of the tax system, then they are more than likely able to compel any company or government agency to provide the information. Canberra is also keeping up with the changes to technology and are investing in technologies which will allow them to monitor your transactions in real-time.

The ATO does provide Tax Agent’s with a pre-filled data report for each client. But if you rely on the pre-filled data to see what the ATO know about you, then you’re in for a shock. Most of the prefill data provided by the ATO is basic information (interest, dividends, employment earnings etc). However, taxation events like selling a property subject to capital gains tax or investment shares will all be collected by the ATO but not necessarily disclosed on the prefilling report. The ATO will wait for you to lodge the tax return and if the capital gain event is not reported, expect to be subject to an audit and most likely you will have penalties applied for failure to report.

We see this frequently with overseas transfers of funds into Australia. The ATO are using AUSTRAC data which has a detailed record of all transfer of funds into Australia. From this you can expect a please explain letter where the onus of proof is on you to show that it is not income from foreign sources. The ATO’s position  is, if you cannot show otherwise, they’ll treat the transfer as income and tax you on it.

Our message to clients is don’t risk not disclosing information to us, the penalties are too great – big brother is now watching.