Australian Tax Office data-matching your financial transactions against your tax return

MSI - DATA MATCHINGBy Mike Purcell, MSI Taylor, Accountants, Brisbane.

In recent years the Australian Taxation Office (ATO) has significantly increased its capabilities in reviewing the affairs of taxpayers, seeking to maximize returns.  Advancement in technology and increased government funding has provided the ATO with a wide array of data matching tools to access information from sources that would be unknown to the majority of taxpayers. This information is then compared to tax returns and any discrepancies are closely looked at.

These sources include:

  • Banks and financial institutions
  • Investment bodies
  • Foreign countries subject to applicable tax treaties
  • ASIC
  • Centrelink
  • Medicare
  • Child support agencies
  • Department of Immigration and Citizenship
  • Employers
  • Motor registries
  • Share registries
  • Land title offices
  • Tenancy agreements
  • Online selling websites

Apart from data matching, since 2009 the ATO has been using small business benchmarks for taxpayers in the SME sector.  These benchmarks are used to identify businesses operating in the cash economy that may not be reporting all their income to avoid paying tax.  Businesses that report outside the benchmark range for their industry are more likely to be subject to audit or review.

The ATO’s aim is to ensure compliance and protect the integrity of Australia’s taxation system.  In the ATO’s compliance program for the 2013-14 year, the ATO has indicated that it will remain focused on the affairs of high net wealth individuals.  A large number of these will be selected for review and more will be contacted for further information.

For larger businesses, the ATO is particularly interested in international dealings and complex structures designed to shift profits offshore to tax havens.  This can be seen by the recent success of Project Wickenby.

Other areas the ATO is currently focused on are:

  • Misuse of trusts
  • Capital gains tax
  • Tax consolidation
  • Phoenix activity
  • Super guarantee
  • SMSF breaches
  • GST
  • PAYG Withholding
  • Contractor arrangements
  • Lodgment compliance

Taxpayers will need to ensure their financial records are in order and substantiation requirements have been complied with as tax disputes generally cause stress, anxiety and in the case of businesses – are disruptive to business operations.

MSI members can help you to identify and understand your tax exposures, work with you to reduce your tax risk profile, and also manage any audits and investigations you have.

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