Certainly, $78 million may not seem such a large sum in a Budget where dollars tend to be spoken of in the billions rather than millions.

However on the eve of tax time, the fact that the Government with its Budget in deficit is willing to spend more on financing the ATO's data-matching activities should send taxpayers a message.

As Smart Investing noted on 21 March, the tax office's data-matching activities are becoming increasingly sophisticated.

ATO computers compare the income declared and deductions claimed by taxpayers with information supplied by the likes of banks, land title offices, share registries, investment fund managers and building contractors. (See tax office publications Data matching: Overview of our compliance approach and the Compliance program 2012-13 .)

The Government expects that the sharpening-up of the ATO's data-matching practices will be rewarding in terms of revenue collection. For its, $78 million extra expenditure, the Government hopes to collect an extra $610 million.

And there is an unmeasurable benefit: the number of taxpayers who will be encouraged to comply with the tax law in the knowledge that the ATO's data-matching systems continue to get better.

Particularly interesting near tax time is that the Government anticipates that the extra data-matching budget for the ATO will also improve its ability to pre-fill e-tax returns.

From an investor's perspective, the additional funding will enable the ATO to strengthen its data-matching reporting systems for sales of real estate, shares (including options and warrants) and units in managed funds as well as payments of dividend and interest.

In short, investors and other taxpayers have an even greater incentive to take care with their tax returns.


By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia9
16th  May 2013