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Now more than ever, as an individual or small business, you need to submit accurate information in your tax return. The ATO is now using data matching to cross-check people’s income, and expense claims.
What is data matching?
According to the ATO, data matching is “a powerful administrative and law enforcement tool.”
Data matching works by sourcing information from multiple third-party sources and then digitally compiling and analysing the data. The ATO says they do this for educational and compliance purposes.
Inaccurate tax returns cost the Australian Government millions of dollars every year. Data matching is a powerful tool to identify errors and inaccuracies in people’s tax returns.
The ATO uses matched data to help people pre-fill their tax returns and to ensure people and businesses:
- lodge tax returns and activity statements when required to do so
- correctly declare their income and claim offsets and other benefits
- comply with their obligations.
The goal is also to detect where people and businesses are operating outside the tax system, and to recover tax debt.
How does data matching work?
Data matching works by taking two pieces of information and comparing them to see that they accurately match.
Multiple programs can be used to data match, but they all operate by using algorithms to compare data.
If data does not match, for example if your tax return says you earned X amount from your investment property last year, but your bank information says you earned more, the program will flag this result.
As noted earlier, the ATO gathers data from third-party resources and compares them to evaluate their accuracy. Some institutions, such as banks, lending organisations and employers, are legally bound to provide this information.
Other third parties that share information with the ATO through data matching can include the following:
- Motor vehicle registering bodies
- Title offices and revenue agencies
- Government bodies
- Australian Transaction Reports and Analysis Centre (AUSTRAC)
- Online selling platforms
- Financial institutions providing merchant facilities and administrators of specialised payment systems
- ‘Gig economy’ platforms like Uber and Airbnb
- Stock exchanges and share registries
- Cryptocurrency-designated service providers
What about privacy?
Protecting Australians’ privacy is a top priority for the ATO.
Not only is your privacy legally protected by the Privacy Act 1988, the Income Tax Assessment Act 1936, and the Taxation Administration Act 1953, but the ATO also has its own privacy policy that must be strictly adhered to.
Do you need to worry about data matching?
If you are being upfront in your tax return, even if the ATO does look into your data, it won’t be a problem. The only reason you may be affected is if the records you share are not accurate; for example if you have earned money as an Uber driver and not declared it on your tax return.
For businesses and anyone who is generating income through investments and capital gains, data matching highlights why it is important to be upfront about the money you make. If you fail to declare your true earnings or get numbers wrong, you can wind up being investigated by the ATO.
The best thing to do to avoid data matching and scrutiny from the ATO is to keep records of all your expenses and share them with an experienced accountant who can prepare a tax return that helps you claim all possible deductions while accurately reflecting your financial activities.
Looking for reliable tax accountants on the Gold Coast? Reach out to Crest Accountants today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
