Earlier this year the ATO flagged its intention to proceed with expanded data-matching and third party reporting activities (as outlined in the Newsletter of May 2014).
On 21 August 2014, the ATO gazetted notices announcing that the expanded activities will include the following data-matching programs:
The ATO will now collect the account details of bank customers from various foreign and domestic-based financial institutions to identify Australian resident taxpayers with offshore bank accounts which may evidence undeclared income and/or gains for the years ended 30 June 2012 to 2015.
The financial institutions listed by the ATO include:
- Australia and New Zealand Banking Group Limited
- Bank of China (Australia) Limited
- Bank of China Limited
- Credit Suisse AG
- Deutsche Bank Aktiengessellschaft
- HSBC Bank Australia Limited
- Hongkong and Shanghai Banking Corporation Limited
- Investec Bank (Australia) Limited
- Macquarie Bank Limited
- Rabobank Australia Limited
- Rabobank Nederland
- UBS AG
- Citibank, N.A.
- Citigroup Pty Limited
The ATO says that the program will, among other things, help to identify Australian resident taxpayers who may be outside the tax system and increase transparency of the worldwide dealings of Australian resident taxpayers. The program will also be used by the ATO to assist in building an understanding of taxpayer behaviour in international dealings, develop compliance profiles and improve fraud detection models.
The ATO estimates that approximately 50,000 offshore records will be obtained under the program.
Furthermore, the ATO will acquire details of entities receiving taxable grants an payments from various Federal, State and Territory and Local Government departments, agencies and authorities.
The ATO says this program will enable it to:
- identify and test the correct taxation reporting by recipients of taxable Government grants and payments from agencies across the Federal, State and Local levels of government; and
- identify areas that require improved educational and compliance strategies to encourage voluntary compliance for recipients of Government payments and grants.
Records matched under the program will exceed 5,000 individuals throughout Australia.
Finally, the ATO will also acquire details of entities collecting and distributing music royalty payments for the 2011, 2012 and 2013 financial years from the following sources:
- Australasian Performing Right Association (APRA);
- Australasian Mechanical Copyright Owners Society (AMCOS);
- APRA New Zealand Limited; and
- AMCOS New Zealand Limited.
Among other things, the ATO says it aims to detect instances of potential non-compliance, especially with omitted income and alienation of personal services income. The ATO also aims to develop a profile of the industry, including any risks and trends of non-compliance with taxation and superannuation obligations, and tailor educational strategies specifically for participants in the music industry.
It is estimated that records for more than 15,000 entities will be obtained, of which most will be individuals.
This increase in ATO data-matching activity means that clients need to be vigilant in ensuring that all information is complete and correct before tax returns are finalised.
Clients should also understand that the ATO is increasingly sharing information with other government authorities, including the Office of State Revenue and WorkCover, and so care needs to be taken that the correct information is reported at all levels.
ATO Increasing its focus on rental property deductions
The ATO also says it is increasing its focus on rental property deductions. It says common errors made by rental property owners include:
- claiming rental deductions for properties not genuinely available for rent;
- incorrectly claiming deductions for properties only available for rent part of the year such as a holiday home;
- incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom or building a pergola;
- overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.
The ATO has also released a series of short videos which explain the tax implications of buying, owning and selling a rental property.
Should you have any questions about the above, or if you are concerned about information provided in past tax returns, you should contact your Goodwin Chivas & Co advisor on (02) 9899-3044.