The Australian Taxation Office (ATO) is a very busy organization. It does much, much more than just processing your tax return or Business Activity Statement and sending you your tax refund or bill and then chasing payment if it’s late.
When you do your tax return every year, either through a tax agent or by yourself using the ATO’s MyTax, you will probably have noticed that much of your information has already been included. Despite our self-reporting taxation system, the ATO collects your details of your salary and wage income, interest earned, dividend and managed fund income, sales of shares listed on the ASX, your private health insurance and a great many other things, directly from those sources before you’ve even started getting your tax return done.
The ATO and other government agencies are always improving their ability to share relevant information with each other. If you receive a large amount of money from a foreign source, the ATO can track it. If you sell real estate, the ATO will find out about it. Transfers of real estate are processed by state government departments (Landgate in WA), so information is shared between different levels of government.
If you submit your tax return and omit any of this information you can bet that the ATO will send a letter to remind you about it and to tell you that they will amend your tax return soon to include it unless you can give them reason not to. Generally, the ATO are probably correct. It’s as if your tax return is required just to confirm what they already know.
Occasionally, we need to correct them. The most common correction we need to make is when the ATO want to include a Capital Gain on the sale of a property that hasn’t been declared because the gain is exempt from being taxed as it was the taxpayer’s main residence, even if it was rented for a period.
It isn’t even just the ATO that does this: A short time after my wife and I moved into our home after getting married we received a land tax assessment from the Department of Finance. When we contacted them to have the assessment cancelled they informed us that the assessment arose because there was a discrepancy between the name on the title of the property and the name on the account of one of the utilities we have.
All of that I’ve discussed so far seems, in my opinion, to be appropriate. The ATO needs to be able to ensure that taxpayers are declaring all their taxable income. In some instances it could be argued that the burden of proof is unfairly put upon the taxpayer.
The ATO also keeps data that has very little to do with directly corroborating taxpayers’ income and ensuring its taxation revenue is not being cheated. More recently, the ATO has begun collecting data to build a profile of those taxpayers considered to be wealthy even for those who have never had any history of any wrongdoing.
The ATO has done this by contacting insurers to identify taxpayers who own assets associated with wealth such as expensive cars or boats, art, planes and thoroughbred horses. I find the ethics of this to be very questionable. If profiling is wrong in consideration of race, how can it be allowable in the instance of wealth?
Currently, wealthy individuals are defined by the ATO to be anyone who controls net wealth of $5m or more. I wonder if that figure will ever be reduced to $2m or $1m.
Perhaps they will eventually remove any lower limit and begin profiling all of us. It seems that in the eyes of the ATO we are all potential tax-cheats, and our rights are not a consideration. The ATO already believes that it is burdened with too much oversight of the activities it conducts1, which I can’t agree with. If the ATO is watching all of us, whether we are wealthy or not, and has the power to put a burden of proof on a taxpayer, then no amount of oversight is too much for me.
DANIEL CAUSERANO – SNR ACCOUNTANT