No Secrets: How the Tax Office Is Using Your Data

In the modern technology age you can’t hide from the Tax Office; it’s watching every dollar you earn and spend.

The ATO can now match Australians’ tax returns with personal data collected from banks, employers and other institutions, to work out whether there’s undeclared or missing income and whether expense claims have been incorrectly reported.

The new data-matching system introduced to reduce tax evasion has already seen an increase in complaints from taxpayers and small businesses that might not be declaring all of their revenue, particularly those suspected to be operating cash systems. 


How does it work?


The Tax Office uses a two stage process to match external data it collects with its existing records.

First, the ATO pulls data from your bank and other financial institutions, including overseas bank accounts. It also pools data from health insurance funds, business activity statements, super accounts and state property information. And more recently, the ATO has extended its reach overseas and has started matching data about Australians with overseas bank accounts earning interest as well!

It then compares all of this data against the information provided in a tax return. If there’s undeclared income or something doesn’t match up, the Tax Office will know and will then open an audit investigation.


How can you make sure you, or your business, are in the all clear?


We’ve compiled a list of tips on how to remain in the ATO’s good side:

  1. Stay on the books

Don’t take on a cash job without declaring it. The ATO has access to your and your employer’s bank data, as well as almost any other data it needs, so it will see all deposits, super contributions, withdrawals and interest you earn.

Make sure everything is “on the books” and declared as income in your tax return. The Tax Office will cross reference your bank account against your ABN and note any missing income from your tax return.

  1. Declare overseas cash

If you have an overseas bank account, you should declare any interest you receive. In 2016, it’s likely the ATO will be paying close attention to any Australians who are not declaring their income from overseas accounts on their tax return.

  1. Freelance is not (tax) free

For those with additional income sources, such as renting out your room on Airbnb, driving with Uber, or providing freelance services, you are not exempt from declaring income. Don’t fall into the trap of thinking that, because it’s relatively new, the growing sharing economy sector is passing under the radar. It’s not.

  1. Keep property income on the level

Don’t under-report your property income or over-report your deductions. The ATO is assessing data from 1985 to 2017 to make sure the property dealings by businesses and individuals are in compliance with tax laws.


But if you’ve done wrong…


Sometimes a taxpayer might make a mistake. Luckily, the ATO offers voluntary disclosures if you’ve done something wrong and you want to correct it. You’ll be seen in a much better light owning up to a previous mistake than keeping quiet and then being caught out by the ATO.

If you’re unsure about your tax obligations, it’s easier (and much less stressful) to speak with a professional. More than 70% of Australians use a registered tax agent to help prepare their tax return. And, with the rise of online tax providers, it’s never been easier to work with a trusted tax professional who’ll give you the peace of mind knowing you are getting the best possible refund and complying with the latest tax laws.

They know where you keep your money.