SmartCompany, March 9 2017
Businesses are advised to make sure their tax records are in order, with one expert warning the Australian Tax Office is beefing up its data tracking methods.
Chartered accountant with Pilot Partners Murray Howlett says the ATO has more than just the tax status of salads on its mind at the moment: SME owners’ social media accounts could also be under scrutiny, Howlett told SmartCompany.
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“The ATO is very concerned about tax avoidance and making sure people are doing the right thing, so they’re trying to get better at looking at what’s publically available,” Howlett says.
“They’re looking for inconsistencies in what people are reporting, and what their social media reveals their lifestyle to be like.”
Howlett uses the example of a citizen who reported low income to the ATO but had multiple photos of “flashy cars and boats” on his social media.
In a statement to SmartCompany, the ATO revealed it has been “investing in data collection analysis to find cases of people’s declared income not matching their lifestyles”.
“It’s a reality of the age we live in that there is more and more information publicly available, particularly through social media platforms. We never go looking for this information where people are doing the right thing and are open with us,” an ATO spokesperson said in a statement.
“We only go looking when something doesn’t add up. We continue to support those who do the right thing, and identify and take action against those who choose not to.”
The ATO’s policies surrounding the use of social media for tax compliance outline mean that ATO staff may only access social media sites found through a search with a “search provider”, such as Google.
Staff are also only able to access “publicly available information”, with the ATO stating “there is a lot of information that can be viewed on social media sites without using a login”.
All records under the microscope
Whilst SME owners might not be investing in Lamborghinis and Teslas, Howlett says the ATO is “dedicated” to assessing all publicly available records for businesses and the social media aspect is just a “small part” of the bigger picture.
“All regulators are employing dedicated staff to mine ‘big data’ and to interpret it,” he says.
“The ATO is looking at all the reporting businesses do and they’re looking for inconsistencies in that info. They’re typically very easy to find, and once they do, it’s very easy to ask questions.”
These claims come in the wake of the ATO announcing on Tuesday it will be dropping into over 400 SMEs in Perth and Canberra as it continues to focus on operators in the cash economy.
“Local visits and interactions provide one-on-one education with small businesses about the tools and information they need to correctly register, lodge on time, maintain accurate business records, and correct any mistakes,” an ATO spokesperson told SmartCompany on Tuesday.
“We also collect data during visits, which we may later use for audit purposes with businesses that are doing the wrong thing.”
The tax office has also highlighted it is keeping an eye on industries where it sees “unrealistic income relative to the assets and lifestyle of the business and owner”.
Strong systems and procedures essential
Along with these crackdowns, Howlett claims the ATO is also looking at e-commerce transactions from businesses and individuals.
“It’s a growing area that our tax laws don’t handle well, as the laws are rooted in physical goods transactions, not transfers of rights and services online,” he says.
“Because of that, the ATO is very concerned it needs to understand the volume of transactions so they can compare with businesses’ reporting on sales.”
For businesses wanting to ensure smooth dealings with the taxman, Howlett first advises that everyone should “just pay the right tax”. He advises well thought out procedures and strong records to show this.
“Make sure your systems and procedures are strong and everything reconciles,” he says.
“That way, inconsistencies that arise are minimised, and if they do arise you are able to explain them quickly and promptly.”
“If you can respond quickly and definitively, this sends a clear message to the ATO that you’ve got all the right systems in place.”