Top tips on getting your taxes right: you’d be surprised what the ATO knows about you.
Australia has a complex, multi-layered taxation system that can be difficult to navigate if you don’t consistently stay on top of all the latest news and updates. Individuals and small businesses that do their taxes themselves run the risk of not complying and getting into trouble with the taxation office, Coco Hou, an expert in Australian taxation and accountancy, warned.
As the owner of Platinum Accounting Australia, Hou heads up the national business with offices in most states across the country. Since 2008, the business has steadily earned the reputation as one of Australia’s most trusted accountants in the taxation industry. Given the complexities of Australia’s taxation system, Hou recommends entrusting the process to a professional.
“Tax in Australia is getting more and more complicated and it’s important that you get it right. The other thing that people don’t understand is that the ATO knows a lot about you and your financial circumstances; in fact it knows more than you realise,” Hou said.
“This is why it is important to ensure that you make the effort to find a good accountant who can support you to develop and lodge an accurate tax return to maximise your refund. In addition, the accountant will assist you to make sure your affairs are properly structured so you are conducting your affairs in a tax effective way. The cost of your tax accountant is tax deductible.”
Hou emphasises that the ATO knows a lot about you by the time you lodge your tax return.
The ATO collects information about you from others
“The ATO collects personal information about you from a number of different sources as well as from yourself when you lodge your return,” Hou said.
“The law allows the ATO to collect this information from other people and entities without you even knowing that this information is being shared.”
“More information is shared about you than you realise. Employers and other payers that make payments under the Pay As You Go (PAYG) withholding system must report all payments to the ATO,” Hou said.
“In addition, the ATO also collects personal information relating to payments made to contractors and suppliers if they do not quote an Australian business number (ABN). This information is then used as part of the ATO’s data matching program.”
Banks, financial institutions and share registries
“Financial institutions are required to send the ATO information about their customers’ investments and investment income,” Hou added.
“So, if you have funds in a bank account somewhere including income from shares, property investments or other income, the ATO will know all about this by the time you submit your tax return. If your return differs to information that the ATO holds, then this could cause problems or trigger an audit.”
“Crypto is an area which is rapidly evolving. While blockchain technology enables people to move funds without disclosing their identity, on ramps and off ramps such as banks and crypto exchanges require identity information. The ATO sources this information as part of its data matching program,” Hou said.
“The ATO also collects information from employers, super funds and other intermediaries in order to deal with requests related to superannuation,” Hou said.
“If you have paid money into a super fund or taken funds out of a super fund, the ATO will know.”
“Don’t bother hiding your funds overseas either. Just as Australia discloses information to treaty partners overseas, authorities in other countries share information with the ATO under international tax agreements. Eventually the ATO will catch up with you. Treaty arrangements change over time and countries that may not have relationships in place can overhaul things pretty quickly and retrospectively,” Hou added.
Other government agencies
“Government agencies such as Services Australia and state and territory revenue offices provide the ATO with personal information as well. The ATO uses this information to help build a complete understanding of your financial situation so it can administer taxation laws, determine your income tax obligations and calculate entitlements accurately,” Hou said.
“The ATO builds a profile of you through personal information it collects from your individual tax return as well as information about individuals associated with partnerships, trusts and companies when those organisations lodge returns. In most cases, the individuals concerned will know they have provided personal information,” Hou said.
“The ATO runs sophisticated data-matching programs. It receives a lot of data and it uses the programs to validate this data and match it against its own information to identify where people and businesses may not be reporting all their information correctly,” Hou said.
“Data matching is a powerful tool that helps the ATO to find issues and escalate them quickly.”
“The ATO receives thousands of complaints and tip offs every year from concerned citizens with information about people who are acting suspiciously or potentially doing the wrong thing,” Hou said.
“This process helps the ATO to identify people who may need to be investigated or audited.”
Why it’s important to find a good accountant
“Aside from understanding where the ATO sources its information about you, the best thing you can do for your yourself or your business is to get a good accountant and build a good relationship with them over time,” Hou said.
“If you are a new business, ask people that you can trust to recommend an account and make sure that the accountant is registered with the Tax Practitioners Board (TPB).
“Tax can be one of the most complex and tricky things to get right. Having a good, trustworthy accountant can not only take the work off your shoulders but will also ensure that your taxes are lodged accurately and in full compliance, keeping you and your business out of the trouble of incurring hefty penalties. Because, as we have just covered, the ATO knows more about you and your financial situation than you think.”