Over the last few years the Australian Tax Office has been steadily increasing the amount of data matching information they use to check if taxpayers are declaring all of their income and gains.
The ATO source data from three sources:
1. Government Agencies
2. Tax Returns of Other Taxpayers
The ATO is entitled to access information from nearly all other Government agencies. This has included limited statistics from the Land Titles Office on property transfers. The NSW Office of State Revenue (OSR) who administers Land Tax in NSW will shortly be requiring vendors to obtain a land tax clearance certificate for every property sale. To date, obtaining land tax clearance certificates has just been a matter between vendors and purchasers and was rarely obtained for residential sales where it was evident that it had been the vendor’s residence.
The ATO has now indicated that it will be accessing information from the clearance certificates from OSR. This will give them more detailed information about the usage of the property, whether rents have been declared as income, whether capital gains on property sales have been declared and if principal residence exemptions have been properly applied.
Tax Returns of Other Taxpayers
There is very little data matching information that the ATO can obtain from the basic tax returns of other taxpayers. However, the ATO has started to require certain tax payer groups to include detailed schedules with their tax returns that do include information that can be used for data matching. The contractor payments summaries for the building industry that was introduced a few years ago is a good example of this.
The ATO has announced that from next year it will require all unit trusts or fixed trusts to provide full details of unit holdings and unit holding changes during the previous 12 months. The ATO could always access this information in relation to shares in companies from ASIC but information on unit holdings in trusts was only available by making direct requests to the trustee on a one on one basis.
The ATO has the right to request any level of information from businesses to be used for data matching purposes. For many years, the ATO has accessed information on interest income from the major banks, but there has been very little sourcing of data matching information outside of the banks. The ATO has made it clear that they are going to expand their net of information providers and are regularly adding new business sources.
The latest example is eBay who are now required to provide the ATO with details on all account holders and all transactions that run through their accounts. The ATO will use this information for a variety of purposes including:
- Is the level of transactions of a degree that the account holder should be viewed as in the business of buying and selling on eBay?
- Is an account holder purchasing items to an amount that could not be justified by the income they are declaring?
- Has an account holder sold items that might be subject to capital gains tax? (Even personal use assets can be subject to capital gains tax if they meet certain criteria and this is often overlooked by tax payers.)
The important thing to remember will all these new changes is that you have nothing to worry about if you are doing the right thing and declaring all your income.
If you have any doubts about whether you need to declare amounts as income or capital gains tax, please contact your Allan Hall advisor, as it is always better to be sure now rather than pay the consequences later.