… of the tax office's data-mining and data-matching processes.

The tax office gathers a vast amount of information from the likes of banks, land title offices, share registries, investment fund managers and building contractors – to name just a few of its sources.
Data-matching involves comparing different pieces of information in a relentless, computer-based search for discrepancies.

Expect the tax office to ask more questions – and possibly conduct a tax audit – if the information declared in a tax return conflicts with the information in its data bank. Data-matching, for instance, may suggest that a taxpayer appears to be spending much more than his or her declared income.

The ATO's 2012-13 Compliance Program reveals that it expects to match more than 600 million transactions in the current financial year – up from 538 million transactions in 2011-12 and from 409 million transactions five years ago.

And the Weekly Tax Bulletin , published by Thomson Reuters, reports that the tax office intends to collect details from motor registries of motor vehicles acquired in 2011-12 and 2012-13 with a "transaction value" of $10,000 upwards.

The ATO intends to use this motor vehicle information to identify taxpayers whose spending exceeds their reported income, to identify businesses that sell vehicles without reporting the sales, and to develop a "compliance profile" of buyers and sellers. Further, this data-matching exercise may help uncover non-compliance in regard to income tax, superannuation, GST, FBT and luxury car tax.

Perhaps a key message from this latest development in data-matching is to underline that taxpayers who do not accurately declare their income and capital gains face an ever-increasing risk of being caught.

To read more on data-matching and to see a video on the subject, see click here to go to the ATO website.


By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
14th November 2012