SmartCompany have reported from 1 July 2014 that ATO data matching regime will be expanded to capture additional information that is not currently available to the ATO. The 2014/15 financial year will be the first financial year where the ATO will have additional information regarding certain transactions in addition to their current data matching program.
The implications are obvious for the taxpayer, whereby certain transactions will already be known by the ATO prior to the taxpayer lodging their returns. Any discrepancies are likely to trigger a review or audit.
The implication for businesses that are required to provide this information is increased costs for compliance in the form of additional reporting along with staff training and consulting costs in ensuring these reports are filled out correctly. This follows quickly on the back of additional reporting requirements for contractor payments in the building and construction industry which were implemented in the 2012/13 financial year.
The additional reporting requirements are addressed below.
Real property transactions
It is possible that real estate agents or conveyancing solicitors will be required to report additional details of vendors and purchasers of real property transactions. The additional details could include addresses, date of births, tax file numbers, ABN’s and ACN’s for entity transactions along with property details such as ID and property address, type of property, contract dates, settlement dates and consideration.
It is unlikely to be as simple as having additional information provided on a contract or settlement statement as there would be privacy issues in having a purchaser’s and vendor’s personal details available to each other. The privacy of personal data would be important in implementing this policy and it would be interesting to see how the ATO addresses this.
Transactions of shares and units in unit trusts
The ATO already has information provided on the date and number of shares sold in relation to shares listed on the ASX where a shareholder has provided their tax file number. The additional reporting requirements could mean the reporting of acquisition dates and number of shares, purchase and sale prices, broker’s fees and capital returns and their payment dates.
Private companies and unit trusts may also be required to report these details of any transfer of share or units in the near future.
Merchant debit and credit transactions
Last year the ATO requested that all the major financial institutions provide credit card and debit card data from 1 July 2012 to 30 June 2014. This data was used to verify sales data of businesses by matching this with information contained in BAS’ and income tax returns.
Due to the growth of e-commerce sites and overseas website operators selling into Australia, the ATO is proposing that any businesses with merchant facilities are now required to report these transactions to the ATO. Given that credit and debit card transactions are now an everyday part of life and the majority of businesses have these facilities in place, the burden of this reporting will shift to businesses from the large financial institutions.
This regime may also impact on overseas e-commerce sites that are operating in Australia as the ATO may look at attributing tax on sales made in Australia. Previously the ATO did not have this data available to them to enforce payments of tax or GST.
Taxable grants from governments agencies
The majority of grants provided by state and federal governments are usually taxable. The proposal would require ABN’s, tax file numbers, date of births, names, address and amounts to be reported for any grants or assistance provided by government agencies. Given that most of the information is already collected and the reporting is made by the government agencies there is unlikely to be a major impact for the taxpayer in this circumstance, but rather a tightening of data matching to include all government grants and assistance payments.
With additional information being available to the ATO, we are closer to having of pre – populated tax returns and possibly no tax returns for some individuals. All of this comes at the expense of businesses doing the compliance work of the ATO.
Businesses will need to undergo additional training to deal with the extra reporting requirements and ensure that any privacy issues are adequately dealt with.
Businesses and individuals will need to become more diligent in their record keeping should a dispute arise from any information that is reported. Any incorrect information that is reported by businesses is likely to result an ATO audit or review which will require the taxpayer to explain the tax treatment of a particular transaction. The additional costs in having to explain a transaction may be seen as unfair (but necessary) where the discrepancy is the fault of a business that has reported information incorrectly through inadequate advice or training.
Treasury are taking submissions from SME’s regarding any comments or concern. Any submissions are due before 11 March 2014.