The Australian Tax Office (ATO) is getting increasingly sophisticated at tracing and matching financial transactions of both business and individuals. Financial software is becoming more complex and powerful. This enables the ATO, working with other government agencies and major financial institutions, to validate compliance with the law by using audit and verification software based matching of your information.

Data matching is a powerful administrative and law enforcement tool. It allows information from a variety of sources to be consolidated, compiled and applied to a range of public policy purposes at relative low cost.

Our Tax Manager Simon Dinér is seeing the results of the ATO’s greater data matching capability. “Increasingly we are being contacted by the ATO regarding a client’s transactions. Of course, just because you are on the ATO’s radar, it doesn’t mean you have done something wrong. Often only a conversation and explanation is required. But everybody needs to understand that transactions, that some years ago would have been invisible, are now much more traceable.”

Just a few dollars on the side

A typical example is in the case of buying and selling goods on the internet. We have heard about people who have been identified by ATO data matching and investigative processes, performing activities which you might think are innocuous enough but, because there was more than just “the occasional transaction”, the ATO noticed that quite a bit of money was involved.

At what point does the ATO get interested? Simon continues, “It is hard to give guidelines but everyone should understand that there is difference between selling the old bike on e-Bay because you got a new one and continually trading in goods online. Be careful of the boundary between the occasional personal trade/hobby, and regular trading that becomes a business as you need to declare business income.”