Data Matching – don’t get caught out at Tax Time!

Now, more than ever, it is crucial to submit accurate information in your tax return. Adam Pasquill, Associate Partner from our Cranbourne office, discusses what data matching is, and how it can impact you when submitting a tax return this financial year.

The ATO is currently using data matching to verify individuals’ income and expense claims. According to the ATO, data matching is considered to be a powerful administrative and law enforcement tool.

The process of data matching involves gathering information from various external sources and using digital tools to compile and analyse the data. Inaccuracies in tax returns result in substantial financial losses for the Australian Government annually. Data matching is an effective tool for detecting errors and discrepancies in individuals’ tax returns.

The ATO uses matched data to help people pre-fill their tax returns and to ensure people and businesses:

  • lodge tax returns and activity statements when required
  • correctly declare their income and claim offsets and other benefits
  • comply with their obligations.

The goal is also to identify individuals and businesses that are operating outside the tax system, and to recover tax debt.

How does data matching work?

Data matching is a process that involves comparing two pieces of information to ensure that they accurately match. Various programs can be used to data match, but they all operate by using algorithms to compare data.

When discrepancies are found, such as conflicting financial information between your tax return and bank records, the program will highlight these differences.

It is important to note that the ATO collects data from third-party sources for verification purposes. Certain entities like banks, lending institutions, and employers are obligated by law to provide this information. Additionally, other third parties may also share information with the ATO through data matching procedures.

Other third parties that share information with the ATO through data matching can include the following:

  • Motor vehicle registering bodies
  • Title offices and revenue agencies
  • Government bodies
  • Online selling platforms
  • ‘Gig economy’ platforms like Uber and Airbnb
  • Stock exchanges and share registries
  • Cryptocurrency-designated service providers

The ATO are currently undertaking specific data-matching activities in the following areas:

  • Credit and debit cards
    The ATO obtain data from banks and financial institutions to identify the total credit and debit card payments received by Australian businesses.
    They don’t gather information about individual credit or debit card holders. Since 1 July 2017, these institutions need to automatically report this information each year.
  • Specialised payment systems
    The ATO obtain data on electronic payments made through specialised payment systems to Australian businesses. This data is analysed in conjunction with data collected through their credit and debit card data-matching program.
  • Online selling
    The ATO obtain details of online sellers who sell goods and services to the value of $12,000 or more. Data is obtained from online selling sites where the data owner or its subsidiary:
    • operates a business in Australia that is governed by Australian law
    • provides an online marketplace for businesses and individuals to buy and sell goods and services
    • tracks the activity of registered sellers
    • has clients whose annual trading activity amounts to $12,000 or more
    • has trading activity for the years in focus.
  • Ride-sourcing
    The ATO obtain data from all ride-sourcing facilitators operating in Australia and their financial institutions to identify ride-sourcing drivers.
    This information allows the ATO to help drivers understand their tax obligations, including registration, lodgement, reporting and payment obligations.
  • Motor vehicle registries
    Data is received from all the state and territory motor vehicle registering bodies to identify all motor vehicles sold, transferred or newly registered, where the transfer or market value is $10,000 or more.
  • Cryptocurrency
    Data is obtained from Australian cryptocurrency designated service providers (DSPs) to ensure people trading in cryptocurrency are paying the correct amount in tax.
  • Investment properties
    By gathering information from various sources, including financial institutions and mortgage providers, the ATO cross-references property loan data against taxpayer-reported details to ensure accurate reporting.
    For Stayz and Airbnb properties, the ATO has information relating to what days a property is available for rent, so as to apportion for private usage.
    For rentals. The ATO can access rental statements from Real Estate Agents directly to ensure all information is disclosed.
  • Insurance
    If you claim insurance on a rental schedule, the ATO can data-match this to annual policy statement from insurance funds. Furthermore, if an individual holds a large amount of assets, the ATO gain information on insurance policies to pinpoint individuals with high wealth assets that cannot be explained by their reported income.

Do you need to worry about data matching?

If you are being upfront in your tax return, even if the ATO does look into your data there shouldn’t be an issue. The only reason you may be affected is if the records you share are not accurate; for example if you have earned money as an Uber driver and not declared it on your tax return.

The best thing to do to avoid data matching and scrutiny from the ATO is to keep records of all your expenses and share them with an experienced Accountant who can prepare a tax return that helps you claim all possible deductions while accurately reflecting your financial activities.

Our team is here to help you, so please reach out to your Highview Accountant if you need further guidance.


Article written by Adam Pasquill, Associate Partner & CPA
Highview Accounting & Financial – Cranbourne