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APS Accounting & Taxation Services Blog

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  • Writer's picturePaul Smyth

Big Brother is Watching YOU - with ATO data-matching at an all time high

Updated: Dec 22, 2021

Double check to make sure that what you are reporting to the ATO is correct, or you have a high risk of being AUDITED. Chances are they've got the information already!

The ATO data-matching programs are designed to increase community confidence in the integrity of the tax system....and raise revenue from those not reporting correctly.

They use the data to:

  • help people and businesses understand their tax obligations, including registration, lodgment, reporting and payment

  • protect honest businesses from unfair competition

  • make it easier for taxpayers by pre-filling their returns

  • assess the levels of voluntary compliance of individuals and businesses with their tax obligations.

If the ATO checks your information it doesn’t automatically mean that they think you are dishonest in your tax affairs. But if the data doesn’t match they will contact you to find out why.

The ATO conducts specific data-matching programs in a number of areas.

If you haven't reported all your income or made a mistake with your tax records, you should Correct the mistake or amend a return.

Double check to make sure that what you are reporting to the ATO is correct, or you have a high risk of being AUDITED. Chances are they've got the information already!

The ATO collects data from a range of sources to protect honest businesses. Specific data-matching programs to allow them to conduct formal data matching without it being legislated. They do this by identifying businesses that:

  • may not be reporting all their income

  • operate outside of the system

  • are operating, but are not lodging returns.

The data is used to understand trends and patterns in industries, including where they need to develop assistance products to help the community understand their tax obligations.

They are currently undertaking specific data-matching activities in the following areas:

The following "REAL examples" show how the ATO have used third-party data to find lodgement anomalies.

Example: Under-reporting merchant sales

A clothing retailer with multiple retail stores appeared to be under-reporting merchant sales. We found an $870,000 discrepancy between their business activity statement and income tax return. The owner made a voluntary disclosure on reporting errors for 36 activity statements across the financial years 2010 to 2013, resulting in unpaid GST of $248,851. Since they were cooperative, no penalties were charged.

Example: Cash-only business caught avoiding GST

One of the owners of a cash-only takeaway chicken shop had been previously audited twice for another chicken shop, involving cash wages and inadequate record keeping.

The owners were claiming a large portion of GST-free sales from the sale of cold, uncooked chickens. When the ATO tried purchasing an uncooked chicken, they were told that it was unavailable as the shop is a takeaway.

Their audit revealed they had understated their sales by around $330,000 and were paying cash wages. The owners had to pay back $103,371 in GST and also $77,528 in penalties.

Example: Using benchmarks to determine unreported income

A cleaning services company appeared to be operating on a cash-only basis and was reporting outside benchmarks.

The ATO discovered that not only was the director receiving more payment than his reported wage, there were no records of contractor payments, and significant AUSTRAC cash withdrawals existed, which the ATO suspected were to pay employees and contractors. The ATO also identified an undisclosed bank account.

The owner’s lack of record keeping and failure to provide all requested documents was enough for the ATO to apply the industry benchmark. This resulted in $156,179 in unpaid GST and $283,602 pay as you go withholding, as well as total penalties of $156,096.

Example: Data matching reveals dishonest business

A business selling horse riding equipment on an online selling platform with sales of $1,280,003 was selected for review.

The ATO discovered the owner had registered the account in another person’s name, and was selling unbranded horse saddles made by his parent’s company in China.

The ATO also found another online selling account and a website where no income was reported from either source. A specialised payment system account linked to this account and the website were linked to the owner’s personal bank account and showed significant AUSTRAC activity to Chinese bank accounts.

The ATO audit determined the entity had been under-reporting income and over-reporting expenses for the life of the business – never declaring income on export sales, including unsubstantiated expenses in their income tax return and non-business activity statement expenses in activity statement purchases.

The owner had to pay $103,263 in GST, $259,298 unpaid income tax, and penalties of $181,280.

Credit and debit cards

The ATO obtain data from banks and financial institutions to identify the total credit and debit card payments received by Australian businesses.

Specialised payment systems

The ATO obtain data on electronic payments made through specialised payment systems to Australian businesses. This data is analysed in conjunction with data collected through their credit and debit card data-matching program.

From 1 July 2017 this information is collected via Business transactions through payment systems.reports.

Business transactions through payment systems

The ATO collect data from organisations that process electronic payments for businesses in a Business transactions through payment systems report.

This initiative replaces the Credit and debit card data-matching protocol and the Specialised payment systems data matching protocol.

What about my EBay Account? Online selling

The ATO obtain details of online sellers who sell goods and services to the value of $12,000 or more.

Data is obtained from online selling sites where the data owner or its subsidiary:

  • operates a business in Australia that is governed by Australian law

  • provides an online market place for businesses and individuals to buy and sell goods and services

  • tracks the activity of registered sellers

  • has clients whose annual trading activity amounts to $12,000 or more

  • has trading activity for the years in focus.

Isn't UBER just some spare cash on the side? Ride-sourcing

The ATO obtain data from all ride-sourcing facilitators operating in Australia and/or their financial institutions to identify ride-sourcing drivers.

This information allows them to help drivers understand their tax obligations including registration, lodgment, reporting and payment obligations.

I'm just fixing up and selling a few cars on the side - Motor vehicle registries

The ATO obtain data from all the state and territory motor vehicle registering bodies to identify all motor vehicles sold, transferred or newly registered, where the transfer and/or market value is $10,000 or more.

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