Electronic data-matching is a tool that the ATO are now using to ascertain whether people are declaring all of their income in their tax returns. Currently the ATO are currently running several data matching programs such as:
Banking transparency strategy (data matching with offshore bank accounts held by residents of Australia)
Credit & debit cards - 2014-15 financial year
Credit & debit cards - 2012-13 and 2013-14 financial years
Foreign Investment Review Board
Department of Human Services Specified Benefits and Entitles 2014-15 to 2016-17
Department of Immigration & Border Protection Visa Holders
Lifestyle Assets 2013-14 and 2014-15
Motor vehicle registries
Music industry royalty payments
Online selling - 2013-14 financial year
Online selling - 2014-15 financial year
Real property transactions - 1985 - 2017
Specialised payment systems
Taxable government grants & payments
What the hell is data matching?
Data matching involves bringing together data from different sources and comparing it, this is done by computers using advanced software so it’s not a question of a civil servant sitting behind a desk somewhere wading through thousands of tax returns and bank statements
The data is then electronically matched with the ATO’s own data holdings to help it identify, for example, individuals who may not be reporting all their income.
In an increasing technological age where practically all money is held electronically somewhere and can therefore theoretically be matched with information held elsewhere.
So how would it affect me if I own a house in Ireland and don’t declare it?
If we take the Banking Transparency Strategy for example, its stated purpose is:
“to identify taxpayers who are not complying with their taxation obligations by comparing data reported by taxpayers with data on offshore accounts provided by financial institutions”
So in essence what happens is the ATO share information with financial institutions and they provide information to the ATO, if the ATO’s software spots any anomalies its issues a letter automatically to the tax payer requesting further details. This happens without any actual humans being involved at all!
If a satisfactory response is not received, this is when the humans in the shape of tax officials become involved they will start to ask further questions, so imagine a scenario where they find out you have a mortgage in Ireland that has rental payments going in every month. It would be pretty hard to explain why you didn’t include the income in your Australian tax return.
What kind of information do these banks have to give the ATO?
Under the current data matching protocol for example, the banks need to share the following information:
Date of birth
Address for correspondence
Account number / customer reference number
Account name and type
Balance as at 30 June 2012, 2013, 2014 and 2015
Aggregate amounts in and out as at 30 June 2012, 30 June 2013, 30 June 2014 and 30 June 2015
If a customer is not a natural person, all identifiers for authorised officers and representatives: name, date of birth, telephone, residential and business address, address for correspondence
Domicile / country of residence
Australian Business Number (ABN) and offshore tax identification number
Identifiers for authorised signatories: name, date of birth, telephone, residential and business address, address for correspondence, ABN, offshore tax identification number
My bank in Ireland is not part of the current data matching protocol – so I am OK right?
You may be OK for now, but these programs are being expanded all the time, take a look at the “Real property transactions - 1985 – 2017” program for example. This program is checking all property transactions including tenant bond payment etc., right back to 1985!
The problem of course is that once they start to investigate your returns they investigate everything and that will include all of your previous year’s tax returns in Australia.
What happens if the ATO find out I haven’t been declaring my Irish property?
If the ATO detect that you did not declare offshore income there will be penalties and potentially a jail sentence if it was found to be an “intentionally fraudulent act”.
The will also go back through all of your tax returns since arriving in Australia.
But possibly the biggest hit to your pocket will be that you will not be able to claim for property depreciation which is a major deduction and this will increase the penalties significantly. This happens because once a taxpayer is caught not declaring income the inspector of taxes makes his own assessment on the information available, so no depreciation reports no deduction for depreciation!
This has been the subject of a recent court case in New South Wales where the tax payer tried to get a Quantity Surveyors report after he got caught not declaring income. The court rejected the Quantity Surveyors Depreciation report that was prepared after the income was discovered, FCT V Rigoli .
This is terrible what should I do?
The ironic thing is that most Irish people who have a property in Ireland may not actually owe any tax at all once they get their affairs in order. Some even are due substantial refunds that they are not aware of. If you are worried about your situation, please feel free to contact us to confidentially discuss your situation.