NEW data-matching technology has given the Australian Taxation Office an unprecedented edge in identifying and punishing tax evaders.

There are now 500 million reasons not to chance your arm against the Australian Taxation Office (ATO) as the 2011-12 financial year comes to a close.

High-speed computers and advanced programming enables the ATO to process and analyse astronomical volumes of corporate information.

According to its last annual report, the ATO performed data matching on 539 million transactions.

These included crosschecking pay-as-you-go group certificates, bank accounts, revenues, profit margins and wage-to-sale ratios.

Legal and Accounting group MSI Taylor reveals the vast majority of data matching is done automatically with income adjustments and advisory letters computer-generated and usually sent out electronically.

And computers rarely give a battler a break.

“In the old days, I may have disclosed $1000 of savings interest in my tax return even though it was $1050. In the past, it was likely the ATO wouldn’t bother asking for the difference. Now it is different,” says MSI Taylor partner Michael Purcell (pictured).

“Now businesses have to correctly and accurately disclose their income, interest from bank accounts, share dividends and sales as well as capital gain from property sales.”

Purcell reveals the ATO has paid close attention in recent times to off-shore financial transactions.

“I have had 10 or so letters from clients about overseas transaction queries and none of them were income-related,” he says.

Purcell recalls one client was advised by the ATO that he had 28 days to contact the agency after $5000 from overseas went into his Australian bank account.

“He did not contact them in time. His income tax assessment was automatically increased and he had to object to the assessment, making it an even bigger problem,” says Purcell.

Purcell says the ATO also uses updated computer programs to create averages and benchmarks for more than 120 different business types.

These include creating comparison ranges relating to turnover, profit margins and wage-to-sale ratios across small, medium and large businesses.

“If a business falls outside the range, the ATO will question whether income was correctly reported,” says Purcell.

Purcell points out that the ATO computers are not always right.

In those instances, expert advice can be invaluable, he says.

“There are valid reasons why some people fall outside the ATO benchmarks," he says.

The Toowong-based MSI Taylor was established in 1991 and employs 30 staff.


  • MAINTAIN proper record keeping procedures on all cash transactions.
  • KEEP records of large transactions that might not be taxable, like the sale of the family home.
  • CONTACT your financial advisor for a preventative review well in advance of any ATO deadline.
  • TAKE out audit insurance to cover the cost of presenting a case to Michael Purcell support your position.

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