How Does The ATO’s Data-matching Program Work?

The ATO uses a tool called data matching to compare information it receives from third-party sources (banks, employers, government agencies, online platforms, etc.) against the information taxpayers report on their tax returns.

In simple terms: if the ATO is told by a bank that you earned interest, or by an online platform that you sold goods, that information may be matched against what you’ve declared. If there’s a mismatch, the ATO may follow up.

Why does the ATO do this?

The program has a few key purposes:

  • To help individuals and businesses get it right, the ATO uses data to pre-fill returns and make it easier for taxpayers to lodge correctly.
  • To protect honest businesses from unfair competition by identifying those who may not be reporting all income.
  • To detect non-compliance (under-reported income, non-lodgment, etc) and to maintain community confidence in the tax/super systems.

What Kinds Of Data Are Matched? 

The ATO collects data from many sources. Some examples:

  • Investment income from banks and financial institutions.
  • Income from employment (and contractors) via employer reports.
  • Transactions from online-selling platforms, ride-sourcing, motor vehicle registries, cryptocurrency exchanges and other newer sources. 
  • Government payments and benefits (matching tax return data to benefit systems) via data-sharing with other agencies.

What Might This Mean For You? 

  • If you have correctly declared all your income, data-matching should support your correct return and reduce the likelihood of contact from the ATO.
  • If there is a mismatch (for example, interest earned was not declared or online-selling income was omitted), the ATO may contact you to request clarification. The mismatch does not automatically mean wrongdoing, but it can trigger compliance activity.
  • Good record-keeping remains essential: the data-match may identify “missing” items, but it is the taxpayer’s responsibility to ensure their tax return reflects all assessable income and correct deductions.

What Do You Need To Do?

  • Check that the income you have reported matches the information the ATO would have received (interest statements, contracting income, online sales, etc.).
  • If you use online selling platforms or receive payments in less traditional ways (e.g., ride-sharing, cryptocurrency), make sure to understand your tax obligations and keep proper records.
  • If you receive an ATO letter indicating a data-matching discrepancy, a prompt response is encouraged, along with reviewing your records to correct any genuine errors or, if necessary, amend your return.

In short, the ATO’s data-matching program is a powerful tool that uses third-party data to support good compliance, help honest taxpayers, and identify potential mismatches that may warrant further review. 

By being proactive and maintaining accurate records, you can keep ahead of the curve and avoid unpleasant surprises.