ATO data-matching plan could create more red tape and costs for SMEs

An Abbott government discussion paper designed to boost the data-gathering capabilities of the Australian Taxation Office could see businesses beleaguered with more red tape and costs, experts suggest.

The discussion paper, Improving tax compliance — enhanced third party reporting, pre-filling and data matching, outlines a number of measures designed to help the ATO gather data on citizens and businesses when it comes to finances involving property, credit, shares in units and trusts and taxable government grants. 

Submissions close today on the proposed reforms, which are due to be implemented on July 1.

The paper says by gathering this additional information, the ATO will be able to offer a pre-filling service to taxpayers on tax forms, and better address the revenue areas at risk.

It says the new reporting measures should assist the government to gain additional revenue of $610.2 million over the forward estimates period. In underlying cash terms, the estimated increase in receipts is $431.7 million.

It reports the government will provide the ATO with $77.8 million over four years to assist with enabling compliance and to expand its data-matching capabilities for this purpose.

Under the proposal, businesses such as real estate agents, fund managers and brokers would be required to submit to the ATO additional information for each area under scrutiny.

For example, when it comes to real estate transactions, names, addresses, contract dates (such as for a sale of a property) and settlement date would be required. In sales of shares and units, information could include the company name and ASX code involved, the shareholder’s account holding number and acquisition and disposal dates, prices and quantities, among other information.

The paper says a key consideration when implementing these reporting facilities would be “minimising the compliance costs for entities that would need to report additional information to the ATO”.

The move comes amid the Abbott government’s drive to slash $1 billion worth of red tape for business.

Pitcher Partners tax partner Theo Sakell says he can understand that businesses may be concerned about the extra compliance required and the cost of upgrading systems to ensure they are providing the ATO with the required information.

“There would be some initial one-off systems upgrading costs…and there could be push down compliance costs associated with this,” he says.

He says an example could be if a real estate agent needs to upgrade its systems, it could end up passing down the costs of compliance to vendors or landlords.

He says there are some aspects of the submission which could be misleading, particularly concerning property and trusts. He says the proposed information required “will increase compliance costs through questions that are simply too broad”.

“For example, a company will often be listed as the legal owner of property and will be the party signing any contract(s) for the sale of that property, but in the middle market it could be acting as an agent, nominee or trustee for one or more other parties who are the actual beneficial owners; and it will be those latter taxpayers who report any gain/loss in their tax returns”. 

“If the ATO is planning to expand its data-matching activities based on sales of real property then the quality of the information used for that data matching will be crucial,” he says.

KPMG tax partner Jenny Clark told The Australian Financial Review the proposal “has potentially far-reaching implications for fund managers, brokers, financial service companies and property buyers”.

Clark said the proposal needed to balance the ATO’s need for greater regulation with its goal to cut red tape.

Minister for Small Business Bruce Billson was contacted for comment this morning on how the proposal would impact red tape, but no reply was received prior to publication.