Small business warning: ATO data-matching targets online selling

I’ve discussed the various Australian Tax Office data-matching programs on several occasions. SMEs should be aware of the latest programs where the ATO will match data from various sources.

The programs help the ATO identify non-compliance with lodgment and payments obligations under the tax law.

The ATO has announced it will request and collect online selling data relating to registrants that sold goods and services of a total value of $10,000 or greater in either or both of the 2011-12 and 2012-13 financial years. The ATO will seek data from eBay Australia & New Zealand, a subsidiary of eBay International AG which owns and operates www.ebay.com.au.

The use of online services to buy and sell goods and services has grown at a very rapid pace in recent years and the ATO is obviously concerned that those who sell goods via the internet are meeting their tax obligations where relevant.

The data-matching program is designed to enable the ATO to address compliance behaviour of individuals and businesses selling goods and services via the online selling site who may not be correctly meeting their taxation obligations, particularly those with undeclared income and incorrect lodgment and reporting for GST.

It is expected that records relating to between 15,000 and 25,000 individuals per financial year will be matched.

Inclusion in the program is based on the following principles:

• The data owner or its subsidiary operates a business in Australia that is governed by Australian law.
• The data owner provides an online market place for businesses and individuals to buy and sell goods and services.
• The data owner tracks the activity of registered sellers.
• The data owner has clients whose annual trading activity amounts to $10,000 or more.
• The data owner has trading activity for the year/s in focus.

The ATO noted that where the client base of a data owner does not present an omitted or unreported income risk, or the administrative or financial cost of collecting the data exceeds the benefit the data may provide, the data owner may be excluded from the program.

Other data-matching programs

The ATO has also announced data-matching programs targeting Childcare Service and Educator Payments and taxable payments and grants from the Queensland government.

Broadly, the ATO is looking at correct tax reporting by payment recipients and to identify areas that require improved educational and compliance strategies to encourage voluntary compliance by individuals.

Details of the programs are as follows:

• Childcare Service and Educator Payments – the ATO will acquire details of entities receiving taxable Childcare Service and Educator Payments from the former Department of Education, Employment and Workplace Relations, now the Department of Education, for the 2011-12 and 2012-13 financial years. It is expected that records relating to more than 12,000 individuals throughout Australia will be matched under the program.
• Queensland government payments and grants – the ATO will acquire details of entities receiving taxable payments and grants from the Queensland government for the 2010-11, 2011-12 and 2012-13 financial years from various state government departments and authorities. It is expected that records relating at least 5,000 individuals will be matched under the program.

Data-matching, and data-mining, are key tools used by the ATO to ensure compliance with the tax laws. The volume of data the ATO now obtains via its many data-matching programs provides it with a vast, and growing, warehouse of information on taxpayers. SMEs should not underestimate the power of these programs to detect failures in tax compliance. Of course, the data has to be accurate in the first place and then properly and accurately matched – but that’s another story.

Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.