Data-matching increasing the ATO's issuance of amended assessments
Recently, the ATO in conversation with the Senior Advocate at The Tax Institute apologised for some taxpayers receiving amended assessments without first being notified of the reasons for the amendment.
Acknowledging that this was a one-off technical glitch, it prompted the ATO to remind taxpayers of the extensive data-matching programs at their disposal. Over 650 million pieces of data, from banks and financial institutions, employers, government agencies, the sharing economy, rental property managers, cryptocurrency exchanges and share registries, are received by the ATO each year.
Data-matching
Data-matching is used in two ways; to pre-fill taxpayer information that can be used by tax agents as a compliance check; and to check the accuracy of a tax return once it is lodged. Data analytics are also used to compare and contrast specific industry levels and to highlight those whose claims stand out.
Errors detected by the ATO before the issue of an assessment are often corrected and the issuing assessment notice will contain the updated data. Questions may be asked of a taxpayer where the reasons for the discrepancy are not evident from the data-matching.
The ATO may also discover errors after an assessment has been issued. Taxpayers can expect to receive a letter outlining what the ATO is planning on amending and why. If no response or explanation is received by the ATO within 28 days the ATO will amend the return to correct any errors or remove any substantiated claims.
Amended assessments
Amended assessments can also issue where a return has been lodged and assessed before the ATO has received its data-matching information. ATO thus recommends to taxpayers and their
agents that returns not be lodged too early (e.g. waiting until August ensures that employers have had the opportunity to finalise their employees’ income statements) and that, for good housekeeping, personal data with financial institutions, etc., is kept up-to-date. Correct use of the pre-fill service will also ensure all income is correctly reported.
The ATO makes no apologies for its increasing reliance on technology and digital solutions to identify income that should have been reported, expenses that have been over-claimed, and returns that have not been lodged. Small errors by a large taxpaying population can result in $8 billion of revenue shortfall.
(Source: TaxVine, The Tax Institute, 19 February 2021.)
Topic 2: Another day…. another scam!
By now you would think that we would be awake to scams and phishing as they have been around for some time. However, scammers are moving to a new level of sophistication with online scams, robo-calls and new pre-recorded messages. Because, there are so many and they are cleverly disguised by hackers and scammers that it’s often difficult to tell the real from the fake. It’s
easy to be misled.
Some businesses may have received demands for payment for domain name and stationery orders renewals and individuals may have received requests for payment or account details from
Westpac, Energy Australia and Telstra for example.
The Australian Government has also been subjected to impersonation by scammers. This includes scammers pretending to be from Centrelink and other social security agencies. Scammers don’t discriminate and all sections of society are vulnerable.
The very latest scam involves a robo-call impersonating the Australian Tax Office. There are two pre-recorded messages being used and the ATO has warned there are two main scripts the scammers are using:
“Your TFN has been suspended as scammers have your TFN details. You need to transfer all your money to the ATO in order to protect it while we sort it out” or,
“Your TFN has been used illegally and you need to move all the money in your bank account to a holding account pending the outcome of legal action”.
According to the ATO, 638 reports of this scam have been received since the start of the year, with seven victims losing nearly $118,000.
Advice from ATO: The ATO does call taxpayers, but note they will never;
- Send unsolicited pre-recorded phone messages
- Use aggressive or rude behaviour, or threaten you with immediate arrest. Jail or deportation
- Suspend your TFN
- Request direct transfer of money to a personal account; and
- Project their number onto your caller ID
If you’re interested in keeping up-to-date with all the latest scams you can go to scamwatch.gov.au/ which is a website run by the Australian Competition and Consumer Commission (ACCC), which provides information to consumers and small businesses.
Topic 3: If you’re thinking about moving “across the ditch”, you might want to think again
A recent article written by DLA Piper (NZ) outlines a significant tax change occurring in NZ stating that from 1 April 2021, the top personal income tax rate will increase to 39% and will apply to annual income over NZ$180,000.
Before the income tax rate increase takes effect, there may be an incentive to pay high income earning employees early and before the new rate applies. But, before taking such steps it will be important to carefully consider the NZ tax and employment law implications.
Employers in NZ could consider a number of steps to take before 1 April 2021, including the following:
- Fast tracking bonus payments
- Accelerating share awards, or bringing forward the share scheme taxing date on existing employee share plans and share option plans
- Bringing forward the payment of cash (and non-cash) dividends for shareholder employees; and
- Early delivery of non-cash benefits subject to fringe benefit tax (FBT)
Self-employed individuals, such as partners in partnerships and contractors, could also consider taking steps to reduce the impact of the 39% rate.
For example:
- Transferring their business into a trust or company, to benefit from the lower trust and company tax rates. The 11% differential that now exists between the top rate of tax at 39%
and the company rate at 28%, will make the use of companies more common - For partnerships, the new income tax rate applies to the 2022 income tax year (rather than from 1 April 2021) and so they will be reviewing their balance dates to determine the
point from which the new rate will apply
Caution should be taken because Inland Revenue will have the ability to review PAYE records to identify any such early payments and could challenge the tax treatment.
For the self employed considering taking steps to reduce their tax Inland Revenue has said it will consider what is acceptable. It would be useful for Inland Revenue to issue specific guidance on
what is acceptable or not.
However, it will be important to take advice from your tax advisor to protect your position.