As the Australian Taxation Office (ATO) expands its use of data-matching technology, businesses and individuals are increasingly under the microscope.
The ATO can legally collect data on taxpayers from third-party sources – including banks super funds, employers and insurers – to identify potential non-compliance and discrepancies. This data must be relevant or reasonably necessary for the tax office’s functions and activities.
Here, we explain what data the ATO collects from third parties:
Employers
The ATO collects payment data directly from employers, with taxable income often being prefilled on tax lodgements. The ATO also collects personal information for payments made to contractors and suppliers if an ABN is not quoted.
Super funds
The tax office collects client payment and personal information directly from super funds.
Banks and financial institutions
The ATO collects clients’ banking data from financial institutions. This includes income acquired from investments and other investment data.
Government agencies
Government agencies (such as Services Australia) and state and territory revenue offices provide the ATO with personal information. It uses this information to determine income tax obligations and entitlements accurately.
Lifestyle asset data-matching
One prominent example of ATO data-matching in action is the lifestyle assets data-matching program. Under this program, the ATO collects data from insurers on policies related to high value personal assets. These assets can include:
- Motor vehicles
- Motorhomes
- Fine art
- Jewellery
- Aircraft
- Marine vessels
This program uses the data acquired from these policies to develop a profile of the taxpayer’s wealth and identify risk of non-compliance. This data is matched with financial data such as income statements and previous tax lodgements, highlighting any discrepancies.
Access to this data has allowed the ATO to address serious non-compliance breaches, such as omitted or incorrect income reporting, misuse of assets and criminal activity.
CAANZ calls for data matching review
Chartered Accountants Australia & New Zealand (CAANZ) has called for a review into how the ATO tests the suitability of the data used for data-matching campaigns. CAANZ submitted a letter to the Tax Ombudsman, claiming that members have received communications from the ATO containing incorrect information related to rental properties.
“There needs to be a review of the processes undertaken by the ATO to ensure the appropriateness of the data that is being relied upon when using third party data matching to produce a mass mailout regarding a particular issue,” the letter read.
“The ATO had used property management data to data match with taxpayers’ tax returns to see if rental income had been omitted. However, feedback from our members suggests the data on the ownership of rental property was sometimes incorrect and therefore, the ATO letters were addressed to taxpayers where there was no omission of rental income in their tax return as they did not own rental property.”
CAANZ has highlighted this issue, which calls into question the nature of the ATO’s data collection and data-matching processes.
Key takeaways
With the ATO leaning heavily on third-party data to verify taxpayer information, it’s never been more important to ensure your records are accurate and up to date. If you receive a data-matching notice or believe the ATO has incorrect information, speak to your accountant promptly.
A proactive approach can help resolve discrepancies early and avoid costly compliance issues.
The team at Optima Partners can help you respond effectively and minimise compliance risks. Contact us if you need support or have any questions.
