How the ATO checks on you

Have you heard of data-matching? It comes in several guises, but the one that should interest you is the data-matching being done by the Australian Tax Office (ATO).

The ATO says it is missing out on an average of $906 per person as a result of incorrect information on tax returns. And with technology making the hunt an increasingly lucrative form of revenue raising, more Australians are receiving “please explain” letters as a result of data-matching.

Did you include the bank interest on your emergency health fund? The rent assistance you received for part of the year? The casual work you did for four months over summer? The money earnt when you put your home on Airbnb while you travelled in the caravan?

“The first point is: don’t panic,” Etax senior tax agent Liz Russell told

“It means that someone has lodged a tax return that the ATO believes may not contain all the information, or may contain incorrect information. The ATO is fed information from different institutions and then they do a data match with the tax return.”

Ms Russell said that not every tax return was data-matched but improved technology meant more were being checked each year. She also explained that comparisons were made with taxpayers in similar circumstances and suspicious claims were investigated.

Whatever you do, don’t ignore a letter from the ATO seeking clarification on your tax return, she said, or you could risk having your assessment “adjusted based on assumptions”. People usually have 28 days to respond.

“If a refund from their perspective looks reasonable within the occupation and range, they’re probably not going to spend a lot of time chasing something up because it’s not cost-effective,” she said. “They’re certainly doing anything that falls outside the expected ranges.”

She explained that an innocent mistake was unlikely to incur a penalty.

“There usually won’t be a penalty when an innocent mistake has been made, such as entering an incorrect digit or forgetting the PAYG summary from a second job,” she told “However, if the mistake results in a larger tax refund than the taxpayer is entitled to, they’ll have to repay the surplus amount, and potentially interest too.”

The ATO has warned that it is examining information provided by online platforms such as Airbnb to identify taxpayers who had left out rental income and claimed unsubstantiated deductions.

ATO assistant commissioner Kath Anderson told that rental properties were on the hit list. “The availability of short stay rentals has exploded thanks to the online revolution,” she said in a statement. “With the growing number of homes, apartments, units and rooms available via accommodation sharing sites, there is a real risk some people may not understand their tax obligations.

“We are increasingly using data and technology to identify any missing income in your tax returns. This data will also identify taxpayers who use sharing economy rental platforms to list a property that is not genuinely available for rent in order to claim unwarranted deductions. There is no hi-tech hideaway for rental income.”

Have you ever made an innocent mistake on a tax return? Or been audited several years later? Do you believe the ATO would be wiser focusing instead on large tax avoiders?

Related articles:
ATO wants to give away billions
Taxman stalking social media
Big fish swim free

Janelle Ward
Janelle Ward
Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.
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