What is Data-Matching And How Does It Impact Your Small Business?
As a small business owner, it’s essential you understand your tax obligations and ensure you are reporting your income correctly. While some may believe they are able to trick the system, the reality is, the ATO uses data-matching technology to help them pinpoint wrong-doers, and more often than not, you will get caught!
So what is data-matching and what information (and from who) can the ATO collect? Keep reading to find out!
What Is Data Matching?
Data-matching is a process used by agencies to compare sets of data collected from a number of different sources against each other, with the primary focus to identify discrepancies. Agencies such as the ATO usually use data-matching to identify people for further investigation or action. The ATO launched their data-matching system in an effort to shine a light on people who have undeclared income missing from their tax returns. The technology opens up new opportunities to catch people who are doing the wrong thing and collect more tax from Australians who may have understated their income.
So how does it work? The process is often based on algorithms or programmed loops that perform analyses of each individual piece of a data set and compare it against each individual piece of another data set in order to find similarities. For example, data from Centrelink can be matched against data from other businesses or agencies in order to identify people who are being paid benefits that they may not be entitled to or people who are not paying the right amount of tax.
It’s important to note that agencies carrying out data-matching must comply with the Privacy Act 1988 (Privacy Act), and agencies that detect incorrect payments are also subject to the requirements of the Data-matching Program (Assistance and Tax) Act 1990 (Data-matching Act). Agencies that are considering taking action against an individual based on the results of data-matching must also inform the individual in question of the results and allow them time to respond.
What Type Of Data Can They Collect And From Where?
The ATO can collect data from any number of sources, including but not limited to:
- > Your place or places of employment
- > Your bank and other financial institutions (including overseas banks)
- > BAS statements
- > Superannuation accounts
- > Health insurance funds
- > Property information from your state
The important thing for small business owners to understand is that if things are not adding up, the ATO can and will check your bank accounts and cross reference payments made against your ABN to confirm missing income from your return.