ATO Data Matching

Employers, financial institutions, companies, private health funds, other businesses and government agencies provide ATO with information on taxpayers, including details of income received, tax withheld and other tax-related data. The supply of this information is required by law. The ATO match the data they hold with the details you provide on your tax return. If they identify differences, they may send you a letter outlining the discrepancy.

The data matching letters that are issued by the ATO may relate to capital gains tax, dividend income, employee share schemes, employment income, foreign source income, fuel tax credits, government benefits, interest income, Medicare Levy, offsets, partnership and trust distributions to name a few.

If you receive a data-matching letter from the ATO, you will need to review your records. The action you take will depend on whether you agree or disagree with the information included in your letter. Find out what supporting documents you need to provide to verify the income or other information reported in your tax return.

If adjustments are required to your tax return, the ATO will issue you with an amended notice of assessment advising you of any amounts payable and how to pay.

Last year the ATO cross-referenced information reported in tax returns against over 600 million transactions provided to them by third parties to identify omitted income and incorrectly claimed offsets, such as the dependent spouse tax offset.

In the past the ATO has focused on areas such as omitted interest and employment income; however, they are now broadening their information matching to encompass a greater range of areas, such as:

• capital gains tax from the disposal of shares, collectibles, precious metals and property;
• foreign source income; and
• contractor income from payments made by government agencies.

By using this approach, the ATO last year contacted over 500,000 taxpayers who had apparent discrepancies in the information they reported in their tax returns. Nine out of ten returns were amended as a result of their enquiries.