nications director at tax preparation firm H&R Block,
says the ATO typically exercises its data-matching
powers responsibly.
“While the ATO does give every taxpayer a risk
profile, it’s only those deemed high risk who are
comprehensively monitored,” he says. “These include
people with overseas assets and those with glaring
anomalies between their income and their outgoings.”
Avoid the crackdown
Most at risk are those who remain blissfully unaware
of the ATO’s ability to track what they do online, and/
or those with glaring discrepancies between what
they earn and what they spend.
For example, if you’re selling more than a certain
amount of goods via eBay or similar online marketplace
annually, the ATO may conclude that you’re trading
for profit, rather than making pocket money from
offloading some old furniture.
The ATO has warned users of “sharing economy”
apps that it performs data-matching with third parties
to detect undeclared income. For example, last year
it wrote to 20,000 ridesharing drivers about their tax
obligations after data-matching identified them as
earning an income through Uber or similar apps, such
as Airtasker and Airbnb.
As a result of concern over meeting their tax
obligations and navigating their way through what
deductions can be claimed, people who offer accom-
modation on Airbnb teamed with H&R Block.
Assistant ATO commissioner Matthew Bambrick
has stated that income should be declared regardless
of whether the sharing economy activities are “odd
jobs”, such as an occasional Airtasker task, renting
out a room through Airbnb or a full business. That
means amounts paid for renting out all or part of a
house or unit through the sharing economy must be
declared as rental income in a tax return.
To avoid getting caught up in the ATO’s crackdown,
Chapman urges Uber drivers to declare their gross
ridesharing income. He says, unbeknown to many,
it’s also compulsory to register for GST if you trans-
port passengers through ride-sourcing regardless of
your annual turnover.
To offset any tax liability, rideshare drivers can claim
numerous potential deductions, including fees and
commissions to Uber, cost of in-vehicle snacks provid-
ed to passengers, insurance premiums and other vehicle
costs such as fuel, servicing and cleaning. Chapman also
reminds people to keep the all-important logbook.
hide
PLEASE
EXPLAIN
When collecting data from
other agencies and organi-
sations for its matching
programs, the tax office
is required to comply with
the Privacy Act 1988, the
secrecy provisions of the
Income Tax Assessment
Act 1936, the Taxation
Administration Act 1953
and other tax laws.
These laws allow the
ATO to go to any individual
and/or third parties to
demand information. This
can result in the ATO issu-
ing letters asking you to
explain undeclared income
and/or seemingly unaf-
fordable purchases made
from your accounts.
Unbeknown to many
people, the tax commis-
sioner – who has access to
all shared data between the
ATO, Centrelink and other
government agencies – can
under Division 353 of the
Taxation Administration
Act 1953 request back-data
from bank statements,
credit cards, money held in
other’s names and/or in
trusts or other structures.
Failure to comply invaria-
bly results in a court hear-
ing and in some cases
the Australian Federal
Police may be called in
to investigate.
While penalties can
range between 25% and
90%, plus interest, in
extreme cases individuals
and/or their accountants
can also risk going to jail.
Admitting to any mistakes
can help to avoid harsher
penalties, says Rami Brass,
director of tax services with
RSM Australia.
Non-disclosure is illegal
There’s also a prevailing misconception that money
kept or placed overseas is not accessible for tax pur-
poses, says Rami Brass, director of tax services with
RSM Australia.
He says overseas bank havens seldom work
because people are invariably found out once they
bring money back to Australia and start “splashing
the cash”. The ATO has extensive powers to obtain
information from overseas tax jurisdictions.
Given that hiding money is illegal, Brass says
the better option is to seek professional help early,
identify all the potential options, including trusts and/
or partnership arrangements for maximising
tax deductions.
He says that alarms bells should ring loudly if
seemingly credible accountants appear willing to
participate in questionable practices. “The better
option is always to disclose all earnings, plus funds
held elsewhere, and willingly pay any outstanding
tax rather than attempt to disguise.”
While there’s absolutely nothing wrong with
using cash, Brass warns that doing cash transactions
purely to avoid tax is likely to land you in hot water,
he says.
Brass also reminds people that non-disclosure of
payments made using cash is an equally serious offence.
Individuals or small businesses using cash payments
to hide earnings usually catch the eye of ATO when
data reports reveal their spending far outweighs their
income, he says.
“Individuals working in a cash environment,
like tradies, domestic help and cash-only retailers,
typically face the greatest temptation of understating
their earnings.”
Most people get caught out when they spend over
a certain amount. But in addition to data-matching,
the ATO also uses what’s known as benchmarking to
flag when a business’s earnings or gross margins are
seriously out of whack with its peers. While there
might be good reasons why your business falls outside
the benchmark, Chapman says the ATO will still want
to know why.
“Given that their third-party data does actually
match what they disclose on their tax returns,
data-matching for the vast majority of taxpayers
isn’t an issue,” he says. “However, if you’re one of
less than 1% of taxpayers under review annually,
it’s time to stop and consider the consequences of
your actions.” M
