Leigh Harry with Sean Row
In recent years, the ATO has substantially increased the measures used to ensure that all information submitted to them is accurate and complete. With the advent of technology, this has provided a considerable array of sources for them to access and extract data. The table below sets out a list of regular contributors of data, as well as the information that they provide to the ATO.
Banks, Financial Institutions and Investment Bodies
Payments to employees and contractors
State and Territory motor vehicle registering bodies
Motor vehicles sold, transferred or recently registered
State and Territory title offices and revenue agencies
Sales and other Transfers of real property
Pensions, rebates, benefits, taxable grants and other payments
Australian Transaction Reports and Analysis Centre (AUSTRAC) and international treaty partners
Foreign source income
Websites (such as eBay) and merchant credit and debit card facilities
Substantial sales and sales history
Stock exchanges and share registries
Share transactions, in particular share disposals and dividend income
Businesses in the building and construction industry
Payments made for building and construction services
Confirmation of private health insurance cover and premiums paid
The ATO have been given wide ranging powers at Federal Government level to compel the above organisations to provide this information. This only increases the need for complete and accurate information to be provided to us when we prepare your financial statements and tax returns.
The main reason that the ATO have taken such measures is to not only protect the businesses that are fully compliant, but also to identify businesses that:
- Do not fully declare their income
- Have not lodged recent income tax returns
- Operate outside of the system
Whilst the ATO continually obtains information from all of these sources there is from time to time specific data matching that is targeted based on higher levels of perceived activity or risk.
Currently the ATO is placing additional focus on:
- Credit & Debit Cards
- Motor Vehicle Registrations
- Online Selling
- Specialised payments systems
Credit & Debit Cards (Merchant Summaries)
In the 2015 year the ATO expects to review over 900,000 merchant records across a variety of industries. The main purpose of matching these transactions is to ensure that all income tax and GST obligations are being met by the business.
Via the use of this data the ATO will be able to identify:
- Cash only businesses
- Businesses whose level of cash income transactions (compared to card transactions) falls below the ATO benchmark
- Businesses who delay reporting GST payable to subsequent periods.
The ATO have identified a need to ensure that all transactions involving motor vehicles are being accurately reported to them. As a result of this, they have taken the step of compelling the relevant State and Territory registration authorities (e.g. VicRoads) to provide details relating to all transfers or sales of motor vehicles where the transfer value of the vehicle exceeds $10,000.
The main reasons they are taking this step are to:
- Ensure all reporting obligations are being met, particularly in respect of reporting these transactions on their Business Activity Statements (BAS’s) and making appropriate Income Tax declarations.
- Identifying company (and trust) taxpayers who have vehicles registered to them but do not report any coinciding Fringe Benefit Tax obligations.
- Match reported income to lifestyle assets. The ATO may become interested to understand how a taxpayer can afford such acquisitions where reported income does not seem to provide for them.
It is worth noting that the information provided by these organisations to the ATO is not limited to what might be commonly considered a “motor vehicle”. Anything that trails a motor vehicle requiring registration is also included meaning caravans, trailers, horse floats etc will also be reported.
Relatively simply the ATO will be supplied with the full account details of any taxpayer whose gross trading activity with an online trading organisation exceeds $10,000.
Currently the main provider of this information is EBay Australia and New Zealand.
Clearly this is merely an attempt to identify taxpayers who are operating outside of the tax system.
Specialised Payments Systems
Along with transaction data provided to the ATO by conventional banks it should be understood that the ATO now has access to throughput data for a number of other service providers such as BPay, BillBuddy, EziPay, PayPal and many more.
Again this is purely an attempt to catch any tax payers who consider these accounts are not monitored and elect to not include this income in their annual reporting.
In all cases above, where a business is selected for review the ATO will either call or write to the business and give them 28 days to explain the income discrepancy. If the ATO is satisfied with the response not further action will be taken. If not, then the ATO will proceed to administrative action.
Should you receive any direct contact from the ATO in this regard please contact your LBW manager immediately so we can assist you with your response and assess your options.