Tax Ombudsman told of ATO data-matching fail

A data matching exercise focused on rental income on the part of the Australian Taxation Office (ATO) led to people who did not own rental properties receiving letters suggesting they had failed to declare income.

Major accounting group Chartered Accountants ANZ has told the Tax Ombudsman there is a need for the ATO to review its processes to ensure the appropriateness of data that is being relied upon when using third party data matching to produce a mass mailout.

CA-ANZ said many of its members had complained about the ATO’s approach based on data matching.

“The most recent complaints received from members were about the ATO’s email to tax agents about their client lodgement obligations for rental property income. This was followed up by an ATO letter to the client giving them an opportunity to correct any mistakes or to request their tax agent’s help to lodge tax return amendment(s),” it said.

“The ATO had used property management data to data match with taxpayers’ tax returns to see if rental income had been omitted. However, feedback from our members suggests the data on the ownership of rental property was sometimes incorrect and therefore, the ATO letters were addressed to taxpayers where there was no omission of rental income in their tax return as they did not own rental property,” the CA-ANZ said.

Elsewhere in its response to the Taxation Ombudsman’s review of ATO letters and communications, CA-ANZ also suggested that the ATO extend the work of a communication content working group to improve letters sent by the tax office.

“Consideration should be given to refreshing the membership of this group and broadening its mandate to include a broad review of existing ATO letters – starting with PAYGI and superannuation contribution notices including those for Division 293. Consideration should also be given to require that this committee be presented with drafts of future ATO correspondence for comments before they are finalised,” it said.

Such a group could ensure that the letters:

• Use every day, easy to understand language with links to the ATO website
• Clearly set out the taxpayer’s obligations, relevant timelines and any other correspondence that the taxpayer will or may receive
• Provide all relevant information on the first page of an ATO letter.