Data analytics: Trying to hide from the Tax Man? Think again!

It’s hard to hide a boat and even harder to hide a house. Much more achievable, however, is hiding some art on your wall or a horse in a stable, and the ATO knows it.

The ATO have long been using data analytics to catch out taxpayers on their undisclosed income. Most recently, the ATO has found that some of the biggest undisclosed financial activities of the wealthy are asset transactions subject to capital gains tax.

The ATO has now begun to use data analytics so that they can discover when a wealthy individual has disposed of a valuable asset that would be subject to tax. A little-known power of the ATO allows them to obtain data from insurance agencies, helping them to more accurately estimate wealth, target their investigations and bring undisclosed lifestyle assets into the taxation system. A previous ATO initiative relating to offshore assets, Project Do It, resulted in over $5 billion in assets declared to 30 June last year, with much more expected.  Lucrative!
 

The reach of data analytics is most recently highlighted in the wake of the global tax haven scandal with the ATO having their sights set on 800 high-net-worth Australians with links to the Panama firm Mossack Fonseca.  It will be interesting to see if a data-driven approach can help this investigation, given the scope of information that is involved.

As the world moves to be more paper-less, agencies like the ATO will be able to access and trace almost every transaction a person undertakes, making that art on the wall much more exposed. 

Further reading:

The Sydney Morning Herald on CGT targeting – ‘Tax Office trawls for owners of boats, planes, horses’
Money Management on Project Do It – ‘ATO targets adviser firms on offshore tax evasion’
The Australian Financial Review on Panama Papers – ‘Tax Office targets 800 Australians in global tax haven probe’
How the ATO uses insurance data – 'Data Matching Program Protocol'