The ATO power of data matching
- Thread starter pickle pickle
- Start date
Not if it isnt invoiced!
pinkboy
I'm fairly sure the rules are similar here.
They may be caught in a round about way.
When auditing the suppliers of the deli, they will see invoices for items delivered. The deli doesn't claim this item...sending up red flags.
Our tax preparer told us they have to provide info from one tax payer, to validate another tax payer, when an invoice is in dispute...cross referencing.
Just like I don't care if our carpenter claims any income we pay him, but we claim it as a deduction. All Revenue Canada need to do, is check and see if the carpenter claimed the income we paid him....cross referencing.
Is it possible for some items of the deli to be 'spoiled', therefore 'unsold'? Wink wink!
pinkboy
Hiding sales is a double edged sword.
If you want to sell the business you want good sales, preferably showing in the books.
The business price depends on the profit. If you are hiding sales you are potentially lowering the sale price of the business.
Sure, you can tell a purchaser that there's undeclared sales.
But a business price which is way out of proportion to taxable profits may ring bells at the ATO.
I've seen businesses paying people cash in hand, at below market rates, in order to minimise expenses going through the books.
But, as well as risking audits, if you know the sector, you will have a good handle on labour costs. If the sector shows 28-32% labour cost, and one business is showing 18%, something is wrong. (Those are figures from a real life situation).
If you want to sell the business you want good sales, preferably showing in the books.
The business price depends on the profit. If you are hiding sales you are potentially lowering the sale price of the business.
Sure, you can tell a purchaser that there's undeclared sales.
But a business price which is way out of proportion to taxable profits may ring bells at the ATO.
I've seen businesses paying people cash in hand, at below market rates, in order to minimise expenses going through the books.
But, as well as risking audits, if you know the sector, you will have a good handle on labour costs. If the sector shows 28-32% labour cost, and one business is showing 18%, something is wrong. (Those are figures from a real life situation).
We shop and eat at restaurants at Inala where there is a large Vietnamese community,there is not an eftpos machine in any of the hundred or so stores,restaurants,fish markets,butchers,fruit stalls,
There is however a commonwealth bank teller machine that always has a long line up behind it.
There is however a commonwealth bank teller machine that always has a long line up behind it.
I knew a baker who got audited several years ago. The ATO can check your purchases and then they know how many loaves of bread a bag of flour should make. My baker friend reckoned they were pretty spot on.
The problem with cash is how do you get rid of it. If you spend it on things - cars, boats, houses etc etc the ATO can decide your declared income could not have supported that, issue an assessment and the onus is on the taxpayer to show the ATO is wrong.
From working several years in a small accounting firm (till I got shafted) I know the following: the ATO (being a huge organisation) conducts specific audits. It may be a business audit or an individual audit of income tax (they also do GST, PAYG withholding etc, but they are different).
For a business, they usually conduct a "T Account audit" or they could rarely do an "asset betterment audit". These audits have been approved through the courts.
With a T Account , you firstly answer a huge questionnaire that covers things like your personal living expenses, loan repayments, gambling wins, informal borrowings, bank balances, earnings from your business, even how much money in your wallet. All relate to current financial year.
The auditor prepares a T account. If your expenses exceed your income - they got ya. They dont give a rats how you overspent (eg fingers in the till). They hit you with amended assessment with penalties.
And because they usually do three financial years they do a "roll back" eg "oh this year you ripped us off 50K, so lets just say you ripped us off 30K last year and 20K the year before. You agree? We can settle this now if you agree to pay $xxxxx.xx ?
Most Data matching done by the ATO is for bank interest. The banks forward their data to the ATO each year where it is matched with tax returns. An amended assessment is issued where interest is not declared (over a certain limit). Easy money for the govt.
Also, the ATO can check cash transactions over 10K through AUSTRAC.
Authorised ATO officers have full and free access to enter buildings to access records (they only have to show their authority badge,Section 263 of tax act). And you must also provide them reasonable assistance and facilities (table chair, photocopier, pens pencils, crayons and colouring books lol).
Deny them and thats obstruction = big fine. But the ATO has a charter and a compliance module. They usually tell you in writing when they are coming and give you pamphlets etc.
Back in the 1980s the ATO raided a bank (Citi bank I think) with no notice, accompanied by locksmiths and acetylene blow torches!. It went to court and the ATO got into trouble because it was just a "fishing expedition". ATO didnt specify which customers or records they were targetting.
For a business, they usually conduct a "T Account audit" or they could rarely do an "asset betterment audit". These audits have been approved through the courts.
With a T Account , you firstly answer a huge questionnaire that covers things like your personal living expenses, loan repayments, gambling wins, informal borrowings, bank balances, earnings from your business, even how much money in your wallet. All relate to current financial year.
The auditor prepares a T account. If your expenses exceed your income - they got ya. They dont give a rats how you overspent (eg fingers in the till). They hit you with amended assessment with penalties.
And because they usually do three financial years they do a "roll back" eg "oh this year you ripped us off 50K, so lets just say you ripped us off 30K last year and 20K the year before. You agree? We can settle this now if you agree to pay $xxxxx.xx ?
Most Data matching done by the ATO is for bank interest. The banks forward their data to the ATO each year where it is matched with tax returns. An amended assessment is issued where interest is not declared (over a certain limit). Easy money for the govt.
Also, the ATO can check cash transactions over 10K through AUSTRAC.
Authorised ATO officers have full and free access to enter buildings to access records (they only have to show their authority badge,Section 263 of tax act). And you must also provide them reasonable assistance and facilities (table chair, photocopier, pens pencils, crayons and colouring books lol).
Deny them and thats obstruction = big fine. But the ATO has a charter and a compliance module. They usually tell you in writing when they are coming and give you pamphlets etc.
Back in the 1980s the ATO raided a bank (Citi bank I think) with no notice, accompanied by locksmiths and acetylene blow torches!. It went to court and the ATO got into trouble because it was just a "fishing expedition". ATO didnt specify which customers or records they were targetting.
Btw it's not just the ATO which can audit you.
I got a little behind in my paperwork for employees, then got audited by Fair Work Australia. Because I hadn't lodged paperwork for employees, I was underpaying them. I ended up having to back pay employees 6 months penalty rates- $20k. There were just as many employees who had been overpaid on the same award, but of course I couldn't claim that back. I was lucky that I didn't get fined on top of that.
I got a little behind in my paperwork for employees, then got audited by Fair Work Australia. Because I hadn't lodged paperwork for employees, I was underpaying them. I ended up having to back pay employees 6 months penalty rates- $20k. There were just as many employees who had been overpaid on the same award, but of course I couldn't claim that back. I was lucky that I didn't get fined on top of that.
why? you can do it anyway. usually the person will be so stuffed anyway that it will rob money from other creditors so the process will bankrupt them, the transaction reversed as preferential and the person holding the judgement would have been better to negotiate a reasonable outcome
I recall being in a taxation law class over 10 years ago and the senior lecturer who worked with the ATO had just come back from a stint with the Canadian tax office. I've forgotten everything I learned in that class except that the lecturer commented about how advanced the ATO is in fraud detection/data matching etc compared to just about every other tax office in the world.
Please elaborate on this because I am a non resident and would like to know if I can legally avoid paying tax on my rental income.
Can I lodge my annual tax return and simply not declare any rental income and the ATO can't do anything about it?
I thought non residents who had income derived in Oz (rent, share dividends) were legally obliged to lodge a tax return?
You're correct. Tax non-residents are legally obliged to lodge a tax return declaring income derived in Australia.
Physically, you can lodge whatever tax return you want, but you'd be breaking the law. The question in the context of this thread is whether the ATO has the data mining capabilities to find out you're breaking the law.
Thanks for confirming.
I've just started my 11-12 tax return and have a big capital gains event after selling a property. I would love to avoid paying CGT but don't think it can be avoided.
not worth running the gauntlet to find out..
Yes the income from rent and cap gains is taxable, avoiding it is not legal.
But some non residents (and probably plenty of residents) don´t bother with tax returns at all and are never caught (I know of one 10 years + and never caught), so I don´t have much faith in ATO tracking processes (its probably mostly bluff to get people to declare).
In Canada, and it seems to be similar here, at the moment we are required to provide information of where the debtor lives, works, bank account details etc. We are not always able to provide that info,and others will not share because of the privacy issues. Since the ATO already has this info, we wouldn't really need it, because they could just access it on our behalf.
They could limit the amount garnisheed to a % of the amount available each time....for each creditor.
Changing the laws on bankruptcyand making it almost impossible would help too. I'd rather be paid $10 a week for life, than nothing at all.
With all the debtors we can't collect from (in Canada) that would be a sizable amount
Well it all depends on the size of the gain doesn't it. People get away with worse everyday.
I'm sure you won't be surprised by this matching:
ATO + Immunisation Register + Centrelink
- our DD aged 4 went to daycare last year and we were eligible to the 50% child care rebate as we both work. We took it as childcare fee reduction rather than lump sum in tax
- DD turned 4 on May 28th. Being 3rd child I didn't get her 4yo immunisations straight away - not by June 30th.
- I lodged my tax at the end of the year expecting a $8k return
...... computer says NO
NOA arrives - $5900 deducted due to amount owed to Centrelink for overpayment of benefit. Huh?!?!? I ring up Centrelink (painful process in itself) to figure out what I wasn't entitled to as I was sure I hadn't applied for anything. Turns out that because DD wasn't fully immunised at June 30th we were no longer eligible for the 50% childcare rebate so they took it off my tax return.
Sigh.
If I had a conscientious objection form lodged to not have her immunized all would have been well but I don't object to immunisations, I'm all for it.
Now I need to follow up with immunisation registry to work out if that is what caused it or if something else is wrong. Then possibly visit GP to get letter then take that to Centrelink blah blah then I can have my money back.
ATO + Immunisation Register + Centrelink
- our DD aged 4 went to daycare last year and we were eligible to the 50% child care rebate as we both work. We took it as childcare fee reduction rather than lump sum in tax
- DD turned 4 on May 28th. Being 3rd child I didn't get her 4yo immunisations straight away - not by June 30th.
- I lodged my tax at the end of the year expecting a $8k return
...... computer says NO
NOA arrives - $5900 deducted due to amount owed to Centrelink for overpayment of benefit. Huh?!?!? I ring up Centrelink (painful process in itself) to figure out what I wasn't entitled to as I was sure I hadn't applied for anything. Turns out that because DD wasn't fully immunised at June 30th we were no longer eligible for the 50% childcare rebate so they took it off my tax return.
Sigh.
If I had a conscientious objection form lodged to not have her immunized all would have been well but I don't object to immunisations, I'm all for it.
Now I need to follow up with immunisation registry to work out if that is what caused it or if something else is wrong. Then possibly visit GP to get letter then take that to Centrelink blah blah then I can have my money back.
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