I have noticed an increasing level of sophistication in recent years regarding the Australian Taxation Offices (‘ATO’) data matching capabilities. Below is an extract of information gathered from the ATO discussing their ability to gather and analyse your information. From my perspective I would prefer to sleep well at night than worry about a few undisclosed dollars snuck away under the table.
Overview of the compliance approach
The Australian Taxation Office (‘ATO’) conduct checks to test taxpayer compliance with the law including audit and verification programs and computer based matching of your information with that obtained from other parties.
Data matching is a powerful administrative and law enforcement tool. It allows information from a variety of sources to be brought together, compiled and applied to a range of public policy purposes at vastly lower costs than manual methods.
In revenue collection agencies such as the ATO’s, it helps them to identify people who are not complying with their obligations, and to detect fraud on the Commonwealth.
They have a twofold approach to compliance:
- to maximise voluntary compliance by making it as easy as possible to understand and meet obligations, and
- to deter, detect and address non-compliance.
What data do the ATO acquire?
Traditional sources of data include investment income information from banks, financial institutions and investment bodies, employment information and welfare payments. The supply of this data is authorised by legislation. The ATO match this data with taxpayers information to detect those who may not be correctly disclosing all of their income.
They also undertake large scale activities involving information exchange with other government agencies. These exchanges of information, are authorised by legislation.
They also have an agreement with Medicare Australia who provide data to enable them to administer the 30% health insurance incentives rebate, and have online access to information held by the Australian Securities and Investment Commission (ASIC) and banking transactions captured by AUSTRAC.
They undertake data matching projects relating to particular risks, issues or industries. For example, these could include scrutiny of property sales to detect capital gains issues or payments made to those involved in the horse racing industry.
Can the ATO obtain whatever data we want?
Australian law gives the Commissioner of Taxation, or an officer authorised by the Commissioner, the right to full and free access to buildings, places, documents and other papers for any of the purposes of the Acts the Commissioner administers.
Their policy is to use these powers, particularly when they obtain information from a third party.
What action do the ATO take with data they obtain?
They compare externally sourced data with information that they already hold. If they check your information it does not mean the ATO think you’re dishonest in your tax affairs. But if they find discrepancies follow-up action will commence. They check the external data with information provided to them in tax returns or in business activity statements. They may use this information to detect people who are not in the taxation system or are behind in meeting other obligations such as lodgment of documents, paying debts, meeting superannuation obligations and so on.
The data is also used to check trends within industries to focus on future compliance risks.
What about my privacy?
Your privacy is protected by the Privacy Act 1988 and the strict secrecy provisions of the Income Tax Assessment Act 1936, the Taxation Administration Act 1953 and other tax law. These tax laws prohibit ATO staff from accessing, recording or disclosing any person’s tax information except in the performance of their duties. Breaches of these laws can attract fines of up to $11,000 and jail sentences of up to two years.
As well, because data matching handles the personal information of so many individuals, they comply with the Privacy Commissioner’s voluntary guidelines on data matching.