The Australian Taxation Office (ATO) is once again extending its data matching program, this time focussing on share data.
According to Assistant Commissioner Kath Anderson, the latest data matching protocol will see the ATO continue to receive share data from the Australian Securities and Investment Commission (ASIC).
“The data includes details of the price, quantity and time of individual trades dating back to 2014, with more than 500 million records obtained. The information complements information that the ATO already holds from brokers, share registries and exchanges,” Ms Anderson said.
The ATO will use sophisticated technology to match the data against information reported in tax returns and other ATO records.
“We will use the information to identify taxpayers who have not properly reported the sale or transfer of shares as income or capital gains in their income tax returns. Having access to increased data will help us to protect honest taxpayers, by detecting those who have not done the right thing. This helps ensure a level playing field for all,” she said.
Ms Anderson said share transactions are high on the ATO’s priority list given more than 5 million Australian adults now own shares.
“Almost one third of all Australian adults own shares, and there is evidence that some taxpayers are getting it wrong when it comes to reporting their capital gains or losses from the sale of shares. In particular, we tend to see higher rates of error among those who don’t regularly trade in shares and who are not aware of the tax implications,” she said.
Ms Anderson said the ATO intends to also make the information available to taxpayers as part of the tax return prefill service in the future.
“We want to help taxpayers and agents to get returns right, so we will prefill as much information as we can to prompt them to include the disposal of shares at the appropriate label in their income tax returns,” she said.
The ATO often allows taxpayers who have made genuine errors to amend their returns without penalty; however deliberate attempts to avoid tax could see the ATO take action.
There are a few simple rules taxpayers buying and selling shares should follow to avoid making mistakes on their tax return.
- First, make sure you keep good records of share purchase and sale prices, as well as costs like brokerage fees. If you sold part of your share holdings, you will need to keep records of the parcel you sold and the parcel you are still holding. This information is critical in calculating your capital losses or gains.
- Second, make sure you declare your capital gains in your tax return.
- Finally, if you have made a capital loss this year, remember you cannot claim it as a deduction in your return. However, you can offset the loss against any capital gains you make this year, and if there is any loss remaining you can carry it forward to reduce any future capital gains you make.
Ms Anderson says taxpayers or tax agents who realise they have made an error or left out their gains should not panic.
“If you realise you made a mistake, contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where you contact us prior to an audit. If you choose not to, you should be aware that penalties can be as high as 75% of the tax shortfall,” she said.
Taxpayers contacted by the ATO will be given the opportunity to verify information collected from data providers before any compliance action is undertaken and will be given at least 28 days to clarify any information obtained.
Details of the ATO’s data matching strategies are published at www.ato.gov.au/datamatching