• Credit & debit cards data matching program protocol - 2012-13 and 2013-14 financial years

    1 Overview

    The Office of the Australian Information Commissioner’s guidelines, The use of data matching in Commonwealth administration – Guidelines (February 1998) (the Guidelines), specify that a data matching program protocol must be prepared by agencies running significant data matching programs. The Australian Taxation Office (ATO) complies with the guidelines and has prepared the credit and debit card data matching program protocol accordingly.

    The credit and debit card data matching program is long standing – this will be its fifth year of collection. This data matching program will support our objectives of creating a level playing field for business as well as detecting non-compliance and dealing with it appropriately to encourage other taxpayers to do the right thing and deter those who do not.

    The program helps the ATO assess the taxation compliance of individuals and businesses. The ATO matches the data provided by financial institutions against taxpayer records to identify those who may not be meeting their registration, reporting, lodgment and/or payment obligations to help provide a more level playing field for those businesses doing the right thing.

    Businesses operating in the cash economy undermine Australia’s taxation and superannuation systems. As part of our compliance activities we will continue our scrutiny of businesses deliberately avoiding their taxation obligations. These businesses are becoming more visible to us as our data matching activities become more sophisticated.

    2 Objectives

    The objectives of the credit and debit card data matching program are to:

    • identify businesses that are not reporting some, or all, of their income
    • identify those who are operating businesses but are not registered with the ATO
    • support and assist the ATO’s development of small business benchmarks
    • promote voluntary compliance with taxation obligations and increase awareness in the community of the ways the ATO uses data matching to address taxation non-compliance, by publishing this program protocol, and
    • assist the ATO in building intelligence about businesses including broader risk, trend and strategic analysis.

    3 Agencies involved

    The ATO is the matching agency and will generally be the sole user. In limited circumstances as permitted under Division 355 of Schedule 1 to the Taxation Administration Act 1953 the ATO may on-disclose information to other Commonwealth, state or territory government and law enforcement agencies.

    The data matching program will be run on secure ATO computer facilities in accordance with ATO-approved policies and approaches.

    Cases identified through the credit and debit card data matching program may be referred to particular areas of the ATO for enforcement of lodgment and taxation obligations.

    4 Data providers

    We collect data from the four largest banks in Australia and other Australian banks and financial institutions that provide a significant proportion of merchant services. The source of the external data is the following ten financial institutions:

    • American Express Australia Limited
    • Australia and New Zealand Banking Group Limited
    • Bank of Queensland Limited
    • Bendigo and Adelaide Bank Limited
    • BWA Merchant Services Pty Ltd
    • Commonwealth Bank of Australia
    • Diners Club Australia
    • National Australia Bank Limited
    • St George Bank
    • Westpac Banking Corporation

    In accordance with paragraph 25 of the guidelines these financial institutions have, as non-Commonwealth organisations, been informed of the requirements of the guidelines. This is particularly pertinent to public notification of the program that is addressed at section 8.

    5 Data issues

    The ATO works collaboratively with data providers to ensure that requests for data are easily understood and reasonable in terms of costs of compliance. Tailored data specifications taking into account the natural systems of providers will be issued to each financial institution as part of this process.

    Based on previous programs, it is estimated that over 8 million records will be acquired, relating to over 940,000 merchants. These records are linked to approximately 90,000 individuals and 850,000 non-individuals.

    The following data items will be requested from data providers, where the information is held, for all merchants, for the 2012-13 and 2013-14 financial years:

    Merchant record fields – latest merchant identification details for the 2012-13 and 2013-14 financial years:

    • Merchant ID
    • Surname (the surname of an individual)
    • First name (the first given name or first given initial of an individual)
    • Other given names (the second given name or second given initial of an individual)
    • Merchant legal name (full name of non individual entity)
    • Date of birth (individual)
    • Business/residential postcode
    • Business/residential address
    • Merchant’s Australian business number (ABN) or Australian company number (ACN)
    • Trading name of merchant
    • Postal address post code
    • Postal address
    • BSB number (for the account where merchant proceeds are credited)
    • Account number (for the account where merchant proceeds are credited)
    • Merchant contact name
    • Merchant contact phone number
    • Merchant Category Code
    • Merchant Category Code Description
    • Group level merchant ID (relationship ID/parent ID)
    • Merchant’s facility registration or activation start date.

    Transaction record fields per merchant ID – monthly transaction totals per merchant ID:

    • Merchant ID
    • Month of period of transactions
    • Credit amounts (all monthly purchase/sale amounts for MasterCard, Visa, JCB and China UnionPay [CUP] credit cards)
    • Credit count (monthly count of all purchase/sale transactions for MasterCard, VISA, JCB and CUP credit cards)
    • Debit amount (all monthly purchase/sale amounts for debit transactions (EFTPOS where cheque or savings account is selected)
    • Debit count (monthly count of all debit cards purchase/sale transactions (EFTPOS where cheque or savings account is selected)
    • Refund amount (all monthly credit and debit refund amounts for refunds transactions)
    • Refund count (monthly count of all credit and debit refund transactions)
    • Card Not Present amount (all monthly purchase/sales amounts where card is not present)
    • Card Not Present Count (monthly count of all credit and debit purchase/sales transactions where card is not present)
    • Cash out included (cash out included indicator = Y/N) (see definition)
    • Cash out only amounts (monthly ‘cash out only’ amounts)
    • Cash out only count (monthly count of ‘cash out only’ amounts)
    • Cash out component (all monthly cash out components of a combined purchase with cash out)

    5.1 Data quality

    The ATO expects that the data acquired will be of a high quality as this data is fundamental to the accurate recording of the merchant operations within the financial institutions, and their customers have a strong interest in the quality of the data. The ATO has also developed quality assurance processes in conjunction with the financial institutions to ensure the integrity of the data.

    When the data is received it will be checked to ensure that the data contains the required information before loading it onto the ATO’s secure mainframe system. The data will be transferred to the ATO’s secure computer systems for matching.

    5.2 Data integrity

    The ATO ensures a high level of integrity of matched data as the Client Identification Compliance system identity matches records on more than one indicator. Records obtained under this program protocol will be matched against various identifiers such as Australian Business or Company Number (ABN or ACN), BSB account information, business or individual name, address and date of birth. Additional matching may be undertaken against other data held by the ATO to further improve the integrity of the data matching process.

    For those records for which further administrative action is proposed, checks are undertaken to ensure that we have correctly identified the individual or entity. These individuals or entities will be given at least 28 days to verify the accuracy of the information before any action is taken.

    5.3 Data security

    ATO staff are subject to the secrecy provisions contained in Division 355 of Schedule 1 to the Taxation Administration Act 1953. The business process for identification matching is designed to allow only a small number of staff access to the Client Identification Compliance system.

    Access to the data warehouse, where the information matching is executed and stored, is strictly controlled, and its security system provides protection, control and audit trails of data set access and system program integrity. The security features include logon identification codes, passwords and security groupings to ensure that access to information is on a needs-only basis.

    The ATO utilises appropriate secure methods that comply with all privacy and security legislation to transfer the data from the providers to the ATO. The data providers will be asked to provide the required data using the ATO’s secure bulk data exchange portal facility (a secure electronic link to the ATO).

    Appropriate data destruction practices are in place (see Section 8).

    6 The matching process

    The matching process conducted on the data obtained from the financial institutions will check for taxation compliance (including income tax and GST registration, lodgment, correct reporting and payment) that may require further administrative action.

    The Client Identification Compliance system matches the data in the ATO’s mainframe environment. Where a taxpayer is identified in the identity matching system the data is transferred to the data warehouse where further profiling will be employed to identify a range of risk cases.

    Merchant transactions will be:

    • compared to income tax return and business activity statement data to identify taxpayers who may have omitted income
    • used to generate lodgment reviews on taxpayers with outstanding tax returns, and in some cases used to issue default assessments
    • used in conjunction with industry and other third party data for broader risk, trend and strategic analysis.

    Some individual records with merchant turnover that cannot be matched to a TFN within the Client Identification Compliance system will be manually analysed to identify those operating outside or partially outside the taxation system.

    The data sets will be analysed individually and at the macro level to determine the merchant characteristics that present the greatest risk, to improve our profiling capability over the longer term.

    The discrepancy matching process is in some instances iterative. This includes the data being used to generate lodgment reviews with subsequent lodgments then being compared to the merchant transaction data for accuracy.

    6.1 Quality assurance

    Quality assurance processes are implemented throughout the term of the data matching program. These commence at the registration of the program through to the final evaluation and closure of the program. Quality assurance processes include:

    • lodging the program protocol with the Office of the Australian Information Commissioner
    • maintaining ATO processes and approvals for the issue of notices to obtain data from the financial institutions
    • ensuring there is consultation between the data owner and the ATO data matching gatekeeper and special purpose data steward to approve requests for access to the data where it is appropriate and aligns with the program protocol
    • maintaining an access management log, recording details of to whom, for what purpose and why accesses are being provided
    • requiring an access report from all data access users ensuring that data was used, maintained and destroyed in the appropriate manner
    • maintaining a contact log of all negotiations with representatives from the financial institution, and
    • maintaining a data management log of all actions undertaken on the data.

    The processes outlined above ensure that the data collected is in line with the ATO’s data collection principles and the Office of the Australian Information Commissioner’s guidelines. The strict recording of data management, accesses and negotiations supports the appropriate management, reconciliation and destruction of the data and will also assist in the improvement of future data matching programs.

    7 Action resulting from the program

    This program will be used to identify businesses that may be under reporting or not reporting income and not complying with their lodgment obligations as part of the intent to provide a more level playing field for businesses that do the right thing.

    Taxpayers identified as being non-compliant with their taxation and lodgment obligations will be referred to the relevant compliance area of the ATO for appropriate compliance action. These cases will be subject to compliance activity, to determine the level of compliance with taxation laws by businesses within this group. In some instances it may facilitate debt collection or lodgment compliance activities to address outstanding obligations. Before any compliance action is undertaken, taxpayers will be given at least 28 days to clarify any information that has been derived from the credit and debit card data matching program.

    Action resulting from the program for the periods reviewed will ensure that businesses are:

    • correctly reporting their income
    • registered for GST, if required to do so
    • meeting their tax return and activity statement lodgment requirements and any other taxation obligations.

    In cases where entities fail to comply with their obligations, even after being reminded of them, the ATO will take other action as appropriate. This may include consideration for prosecution. In addition, a risk profile of the taxation compliance of businesses within this group will provide pertinent statistical information to the ATO to determine new and appropriate education and compliance strategies for a range of industries.

    8 Time limits applying to the conduct of the program

    The collection of the 2012-13 financial year data under this program protocol is expected to occur in the period from December 2013 to January 2014. The collection of the 2013-14 financial year data under this program is planned to be from October to December 2014.

    In accordance with the provisions contained in paragraph 26 of the guidelines, the ATO has sought a variation to the destruction conditions detailed in paragraphs 69 to 71.

    Considering the iterative nature of the discrepancy matching that occurs under this program, as well as the longer term analysis and risk profiling of the data set that is proposed, the ATO considers that a suitable timeframe for the destruction of all data under this program would be up to three years from the receipt of all verified data files from all data providers. This timeframe aligns with the requirement to evaluate the data matching program within three years as required in paragraph 76 of the guidelines.

    In seeking to vary the conditions of paragraph 26, we rely specifically on subparagraph 28(vi) of the guidelines which reads 'the effect that abiding by all the requirements of the guidelines would have on the effectiveness of the proposed program' and subparagraph 28(viii) which reads 'the effect that abiding by all the requirements of the guidelines would have on the public revenue – including tax revenue, personal benefit payments, debts to the Commonwealth and fraud on the Commonwealth.'

    In seeking this exemption, we also rely on subparagraph 28(i) in that there will be no adverse effect on an individual’s privacy by varying the destruction conditions of the guidelines.

    When data is no longer required it will be destroyed in accordance with General Disposal Authority 24 and/or the Records Disposal Authority 1194 as applicable. All data to be destroyed will be handled securely under the supervision of the ATO’s IT trusted access branch and in accordance with the ATO’s security procedures table for dissemination limiting marker: sensitive.

    9 Public notice of the program

    The ATO will publish the notice of this data matching program in the Commonwealth government notices gazette on 16 December 2013. The ATO will provide a copy of the notice to all the financial institutions providing data. A copy of the notice will be provided to the Office of the Australian Information Commissioner, under separate cover.

    A copy of the proposed notice is at appendix A.

    The ATO will consider other appropriate communication media in which to publicise the program. The ATO will also advise each of the financial institutions that they may advertise this data matching program on their websites or through other forms of media for their account holders.

    10 Relationship to lawful functions and activities

    The Commissioner of Taxation has responsibility for ensuring that taxpayers meet their taxation obligations. Taxpayer compliance with tax obligations is a matter of concern to the Commissioner and failure to address issues of this nature could potentially undermine community and government confidence in the integrity of the tax system.

    The credit and debit card data matching program is part of the ATO’s focus on encouraging high levels of voluntary compliance and addressing the issues raised by non-compliant behaviour. Data matching of credit and debit card data provides a degree of assurance that taxpayers are meeting their taxation obligations.

    11 Legal authority

    The information sought from the financial institutions will be acquired under:

    • Section 264 of the Income Tax Assessment Act 1936
    • Section 353-10 of Schedule 1 of the Taxation Administration Act 1953.

    These provisions relate to information to be used by the ATO for income tax and GST purposes (respectively). The ATO will use the information for taxation compliance purposes. This is within the limits on the use of personal information and obtained for a particular purpose as directed by Information Privacy Principle (IPP) 10, contained in section 14 of the Privacy Act 1988 and Australian Privacy Principle 6 (APP6) contained in Schedule 1 of the same act (with effect from March 2014).

    Data providers are required by law to comply with this legislation. Disclosure in these circumstances accords with exception 2.1(g) to the prohibition on disclosure of personal information to someone other than the individual concerned (National Privacy Principles, in Schedule 3 of the Privacy Act 1988 and the equivalent APP6 in Schedule 1 [with effect from March 2014]).

    12 Alternative methods

    The ATO has considered a range of alternatives to using financial institutions’ data to identify taxpayers who are not reporting some or all of their income and are at risk of not complying with their taxation obligations.

    Using only ATO data is limited by the following factors:

    • The ATO does not hold credit and debit card transaction data
    • ATO data only covers entities that have an ABN or TFN. This data will not identify entities that have never registered for an ABN or TFN and are operating outside the taxation system.

    Utilising external data from external organisations

    Advantages

    Disadvantages

    • High return on investment – data matching is an efficient and effective method of detecting and treating risks such as omitted income and non lodgment of returns
    • Publication of data matching program promotes voluntary compliance
    • Encourages commercial and non-government organisations to understand and support lawful behaviour in their business dealings and engagement with taxpayers

     

    • Significant time is required to acquire, match and assess the data
    • Potential negative public perception of data matchin including pricacy concerns
    • Cost of compliance to data providers

     

    Considering the above, using data from external sources (ie financial institutions) combined with ATO data, is the preferred method for this program.

    13 Previous programs

    The data collection has been undertaken annually, commencing in 2010 with data relating to 2008-09 financial year.

    The number of financial institutions providing data increased each year after the program’s inception and has been stable at 10 since 2012. Since the inception of the data collection additional business lines within the ATO have started utilising this information. This includes areas of the ATO dealing with GST, employer obligations, pay as you go, debt and income tax.

    14 Costs and benefits

    14.1 Benefits

    The benefits of this program are expected to be significant and include:

    • an enhanced capacity to identify taxpayers who are operating a business but not reporting some, or all, of their income or who are not complying with all of their taxation obligations
    • a reduced risk to revenue as the ATO will be able to more readily identify businesses operating outside the tax system and in the cash economy
    • the ATO being able to use the intelligence gained from this data to refine risk profiles and parameters
    • the ATO having a greater understanding of the businesses operating in the cash economy and being able to cater for these businesses in our compliance strategies
    • there being greater integrity in the taxation system because the level of voluntary compliance and awareness within the community of taxation obligations is increasing
    • maintaining community and government confidence in the taxation system – maintaining this confidence is critical to the ongoing role of the ATO. This program will highlight actions being taken by the ATO in relation to registration, lodgment and correct completion of income tax returns and business activity statements.

    14.2 Costs

    The costs of the credit and debit card program are expected to be minimal in relation to the total revenue protected. The costs include ATO resources to:

    • store data in the ATO information technology facilities
    • run the data matching program and activities
    • support the data matching system
    • prepare and analyse data for case selection and profiling, and
    • relationship management.

    Appendix A - Gazette notice

    Commissioner of Taxation

    Notice of a data matching program

    The Australian Taxation Office (ATO) will request and collect data relating to credit and debit card sales of entities for the periods from 1 July 2012 to 30 June 2014 from the following financial institutions:

    • Commonwealth Bank of Australia
    • St George Bank
    • Westpac Banking Corporation
    • Australia and New Zealand Banking Group Limited
    • National Australia Bank Limited
    • Bendigo and Adelaide Bank Limited
    • Bank of Queensland Limited
    • BWA Merchant Services Pty Ltd
    • American Express Australia Ltd
    • Diners Club Australia

    This acquired data will be electronically matched with certain sections of ATO data holdings to help provide a more level playing field for those businesses which meet their obligations by identifying those who may not; for potential corrective action. It is expected that records relating to approximately 900,000 merchants will be matched.

    This program is called the credit and debit card data matching program and it will enable the ATO to help provide a more level playing field for businesses that do the right thing by identifying, for corrective actions, those that may not be meeting their obligations.

    A document describing this program has been prepared and lodged with the Office of the Australian Information Commissioner. A copy of this document is available by emailing SpecialPurposeDataSteward@ato.gov.au with reference to the credit and debit card data matching program.

    The ATO complies with the Office of the Australian Information Commissioner’s Guidelines, The use of Data Matching in Commonwealth Administration, which includes standards for data matching to protect the privacy of individuals.

      Last modified: 25 Aug 2015QC 43635