Adrian Abbott, of Sydney Tax Advisory, and Gregory Ross, of Eakin McCaffery Cox, discuss the latest on how the ATO is cracking down on undeclared income through its ongoing data matching program. The Tax Office has announced it will keep an eye on income and capital gains on the sale of shares, they write.
By media release dated 30th October 2018 the ATO announced that it would start the task of checking if taxpayers were properly disclosing income and capital gains on the sale of shares.
Assistant Commissioner Anderson said:
“.. share transactions are high on the ATO’s priority list, given more than 5 million Australian adults now own shares”.
The data matching covers 500 million records, dating back to 2014.
‘Prefill’ to semi-automate
Prefill is the information currently made available to taxpayers and their tax agents to prepare returns that cover interest, dividends, PAYG summaries, health insurance, to name a few.
Putting purchase and sale of the shares on prefill status with taxpayers and with tax agent’s on the portal will: –
“Help us to protect honest taxpayers, by detecting those who have not done the right thing. This helps ensure a level playing field for all”.
Ms. Anderson said.
It was 2013 – 2014 that the Government initially announced and provided funding to make the reporting of share transaction data to the ATO mandatory.
The Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015, required reporting from the ASIC from 1 July 2016. Share registries, brokers,trustees and fund managers were required to provide the information from 1 July 2017.
The ATO is now gearing up for a close look at share sales and share trading activity.
Providers of Data
Currently data is to be obtained from the following share sources:
- Link market services
- Australian Securities Exchange
- Advanced share registry services
- Security transfer registrars
- Automatic registry services
At the same time, data will continue to be obtained from ASIC.
Information being collected
The data elements being provided include: –
- Full name, full address
- Holder identity number, share registry number
- Entity name, entity ASX code
- Purchase date and price, sale date and price
- Quantity of shares acquired and disposed of
- Corporate actions, such as corporate reconstructions
- Broker identity
- Information to be obtained from the ASIC will be even more complete
Information being data matched covers 25 million transactions from share registries involving 2.1 million taxpayers, with over 500 million records being obtained from the ASIC.
It is no doubt, the obligation of taxpayers to ensure that their tax returns include any income, or capital gains from share activity.
However, you can be sure that between 2014 and 2018, if for some reason the taxpayer has not included the share information in the tax return, then a voluntary disclosure would be urgently suggested.
Legal authority to undertake data matching
The ATO have said that their information gathering powers under Section 353-10 of Schedule 1 to the Taxation Administration Act 1953 is sufficient to allow the data matching programs.
Under that Section, the Commissioner by notice in writing may: –
- Require information for the purposes of the administration and operation of the taxation law.
We find interesting the extended use of data matching power to “Prefill”, serving up to taxpayers and their advisers the ATO’s understanding of dealings, so making it harder for taxpayers to “forget” to account for relevant income and dealings.
It is also of note that ATO’s apparent reliance on powers under Section 353-10 of Schedule 1 to the Taxation Administration Act 1953 which has historically been used more in context of where there has been a ‘history’ between the taxpayer and ATO, rather than, as now proposed, a blanket operation.
The ATO note that the data matching program is subject to the Privacy Act 1988 and the principles set out in Schedule 1, Principal 6 (APP 6).
Data matching millions of transactions and making common sense of the information is going to revolutionize the reporting of income and expenses to the ATO, is sure to catch many undeclared transactions and likely to recoup many millions of dollars in unpaid Income Tax and Capital Gains Tax.
The text of the paper is only a summary and discussion of particular facts and principles. It is not to be taken as legal or commercial advice as to any particular factual circumstances.
LLB, BEc, FCIS, FGIA, FCA, CTA
Chartered Tax Advisor
Sydney Tax Advisory
LLB Accredited Specialist
Government and Administrative Law
Eakin McCaffery Cox