The Office of the Australian Information Commissioner’s (OAIC) ‘Guidelines on data matching in Australian government administration’, dated June 2014 specify that a data matching program protocol should be prepared by agencies running significant data matching programs. The Australian Taxation Office (ATO) complies with the guidelines and has prepared the taxable government grants and payments data matching program protocol accordingly.
In the 2011–12 Federal Budget the government announced the ‘Tax compliance – reporting government grants and payments’ new measure and allocated funding to the ATO. The intent of the taxable government grants and payments compliance project is to monitor the accurate reporting of grants and payments made by the three tiers of government, through sophisticated data matching techniques.
The ATO proposes to match data provided by entities across the three tiers of government against the ATO’s taxpayer records. This process will focus on verifying grants and payments made to contractors and service providers that are taxable in the hands of the recipient of the payment.
Cases identified by the data matching process may be referred to other areas of the ATO to ensure compliance with taxation obligations.
This data matching protocol is intended to cover all data matching in relation to the above described taxable government grants and payments project and replaces the following previously advertised data matching program protocols –:
- Local government payments (2011, 2012, 2013 and 2014 financial years)
- Childcare service and educator payments (2011–12 and 2012–13 financial years)
- Queensland state government payments and grants (2011, 2012 and 2013 financial years)
The overall outcomes to be achieved from this project are to monitor the accurate reporting of government grants and payments for taxation purposes, address non-compliance with taxation obligations and ensure greater equity and a level playing field for individuals and businesses.
The objectives of the proposed data matching program are to:
- Obtain intelligence about the recipients of taxable payments and identify risks and trends of non-compliance within this population.
- Identify entities that may be operating outside the tax system.
- Identify a range of compliance activities appropriate to address risks in this population.
- Work with taxpayers and their representatives to obtain a better understanding of the issues identified as risks and trends of non-compliance.
- Address instances of non-compliance with taxation obligations, including registration, payment, lodgment and correct reporting and related matters
- Promote voluntary compliance and strengthen community confidence in the integrity of the tax system by publicising the outcomes of the taxable government grants and payments data matching program.
In light of this, the ATO is seeking external data from agencies across the three tiers of government which it can cross-reference with its internal data to identify relevant cases for administrative action and implement appropriate educational campaigns.
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 of the Taxation Administration Act 1953 the ATO may disclose information to other Commonwealth, state or territory government and law enforcement agencies.
The data matching program will be run on the ATO secure computer facilities in accordance with ATO approved policies and approaches.
The data sources will be federal, state and territory government departments and agencies and local government authorities.
While we are unable to provide an exact figure as data is progressively acquired, there is no question that we will exceed 5,000 individuals.
In accordance with Guideline 11 of the Australian Information Commissioner’s ‘Guidelines on data matching in Australian government administration’ source entities that are not agencies are informed of the requirements of the guidelines. This is particularly pertinent to public notification of the program which is addressed at Section 11.
4 Data issues
The following data items will be requested for each financial year.
- Name or business, trading, company name
- Australian business number (ABN)
- Contact person
- Contact details
- Creditor, vendor, account or other unique identification number
- Reference, transaction or other unique payment number
- Payment amount
- GST amount
- Date of payment
- BSB, account number and name
- Refund and reversal of previous transactions
4.1 Data quality
The ATO expects that the data acquired from all three tiers of government will be of good quality as there is a requirement for government entities and agencies to account for and report annually on the spending of public money, supporting transparency and accounting standards.
This data is copied into a standardised format and checked to ensure that the data contains the required information before loading it to the ATO’s mainframe systems.
5 Data integrity
The ATO can ensure a high level of integrity of matched data as the Client Identification Compliance system identity matches records on more than one identifier. That is, where Australian Business Number, name and address identifiers are available, all will be used in order to match records. Very high confidence matches will occur where all identifiers are matched. Data matches on the name and address fields alone will still provide a high confidence match. Some of the data is expected to be matched at lower confidence levels due to missing data fields or differences in fields between ATO data and that supplied by the respective data providers. 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 where further administrative action is proposed, checks are undertaken to ensure that we have correctly identified the entity. These entities will be given the opportunity to verify the accuracy of the information obtained prior to any action being taken.
6 Data security
ATO officers 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, 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 will utilise appropriate secure methods that comply with all privacy and security legislation to transfer the data from the source agency to the ATO. The source agency will be requested to provide the required data via the ATO’s Data Transfer Facility (a secure electronic link to the ATO).
Where the source agency is unable to use the ATO’s secure transfer facility, they will be required to provide the data by CD or DVD storage media encrypted using a product that satisfies Australian Government Standards. Any data placed on CD, DVD storage device will be password protected, with the password to extract the encrypted data files provided under separate cover. The disc media will be transferred securely by ATO officers or an approved ATO secure courier service.
The data format expected will be Microsoft Excel or comma separated value (CSV) files. These files will be password protected and the password provided under separate cover.
Appropriate data destruction practices are in place (see Section 10).
7 The matching process
The matching process conducted on the data obtained from respective source agencies will identify recipients of grants and payments that are taxable in the hands of these recipients that may require compliance action.
The Client Identification Compliance system identity matches the data in the ATO’s mainframe environment. Where a taxpayer is identified in the identity matching system the data will then be transferred to the data warehouse where income matching will occur. Profiling techniques will be employed to select high risk cases. The selected cases will then be loaded to our mainframe systems for actioning. The lower risk cases will be analysed and a decision will be taken to either take some form of administrative action or destroy this dataset.
8 Quality assurance
Quality assurance processes are implemented throughout the term of the data matching program commencing at registration of the program through to the final evaluation and closure of the program. Quality assurance processes include:
- Lodging the taxable government grants and payments data matching 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 source agencies.
- Data owner consultation with the ATO data matching gatekeeper to approve requests for access to the data where it is appropriate and aligns with the taxable government grants and payments data matching program protocol.
- Maintaining an access management log recording details of who, what and why access to the data is provided.
- Requiring an access report from all data users ensuring that data was used, maintained and destroyed in the appropriate manner.
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.
9 Action resulting from the program
A profile of the taxation compliance of entities that have received taxable grants or payments from relevant agencies across the three tiers of government will provide pertinent statistical information to the ATO to determine appropriate educational and compliance strategies for these entities.
Further, a profile of the lodgment compliance for these entities will be obtained. This information will be used to gain a statistical picture of the lodgment compliance of these entities.
Taxpayers identified as being non-compliant with their taxation obligations may be referred to a relevant area of the ATO for appropriate follow up action. Action resulting from the program will be to ensure that participants are:
- Meeting registration requirements
- Meeting lodgment obligations
- Correctly accounting for transactions for income tax and GST purposes
- Meeting their payment and remittance obligations
Before any administrative action is taken, taxpayers will be given the opportunity to verify the information collected by the ATO. For example, if the matching process output suggests that a particular entity identified from source data may not be meeting its taxation obligations, but are in fact reporting these obligations under another entity name, they will be given an opportunity to provide this information. An example of the type of letter to be sent to taxpayers can be found in Appendix A. Taxpayers will generally be given at least 28 days to respond before any administrative action is undertaken.
In cases where entities fail to comply with their obligations, even after being reminded of them, escalation to our prosecutions area for follow up action may be considered.
10 Time limits applying to the conduct of the program
The collection of data under this program protocol is expected to occur in the period from 2013 to 2017.
In accordance with the provisions contained in Guideline 10 of the Office of the Australian Information Commissioner’s Guidelines on data matching in Australian government administration (June 2014), the ATO is seeking a variation to the destruction conditions detailed in paragraphs 7.3 – 7.7 of those Guidelines.
The ATO considers that a suitable timeframe for the destruction of the data would be three years after receipt of all data files from each source entity. Although during this time we would look to destroy individual datasets where appropriate and period of review timeframes have passed.
In seeking to vary those conditions, we rely specifically on paragraph 10.2(f) of the guidelines which reads “the effect that complying with the guidelines would have on the effectiveness of the proposed data matching program” and paragraph 10.2(h) which reads “the effect that complying fully with the guidelines would have on the public revenue – including tax revenue, personal benefit payments, debts to the Commonwealth and fraud against the Commonwealth”.
Our reliance on these sub-paragraphs is based on the understanding that:
- Project leaders will not be able to make firm decisions about whether particular information will be subject to some form of administrative action until data is obtained from all sources. As indicated at page 4 of this protocol, the data matching program proposes sourcing data across a number of programs and financial years. There is potential for taxpayers to be involved in activities across these programs and therefore they could be included in a number of datasets.
- It is also possible taxpayers have transactions across multiple government authorities and borders, to develop a complete compliance picture for these taxpayers we consequently need to retain data until such time as all data has been acquired and considered. At this stage, it is anticipated that the data acquisition phase of this program will continue until mid-2017.
There is no intent to create a new permanent register of the data. The data is to be maintained for a period that deviates from the normal retention period in the Guidelines to enable us to fully evaluate all data sources as they are progressively acquired and make firm decisions based on a full picture of taxpayer involvement.
In seeking this exemption, we also rely on paragraph 10.2(a) in that there will be no 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 (GDA24). 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: For Official Use Only.
11 Public notice of the program
The ATO published a notice in the Commonwealth gazette in relation to this program on 21st August 2014. The ATO will provide a copy of this notice to source organisations.
A copy of the notice can be seen at Appendix B.
The ATO will consider other appropriate communications to publicise this program. The ATO will also advise each of the source agencies that they may advertise this data matching program on their websites or through other forms of media relevant to their payment recipients.
12 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 taxable government grants and payments 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 government grants and payments data provides a degree of assurance that taxpayers are meeting their taxation obligations.
Further, the government announced this measure in the 2011–2012 Federal Budget and allocated funding to the ATO to conduct the compliance project with the aim of monitoring the accurate reporting of grants and payments made at the three tiers of government through sophisticated data matching techniques.
In the 2012–2013 Federal Budget the government announced a new legislated reporting measure to formalise the annual reporting of specified government grants and payments to the ATO. This reporting measure was slated to commence from 1 July 2014 with the first annual report due in July 2015. In the 2013–2014 Federal Budget the government announced a two year delay to the proposed start of the proposed reporting system until 1 July 2016 with the first annual report due in July 2017, a further one year delay (commencing 1 July 2017, first report due in August 2018) was subsequently needed to allow sufficient time for reporters to prepare for the requirements of the new measure. These delays have necessitated the continuation of the compliance project until this time.
This data matching program is part of the ATO’s focus on addressing the issues raised by non-compliant behaviour and implementing the new measure. This data matching activity will provide a degree of assurance that taxpayers are meeting their taxation obligations.
13 Legal authority
Where possible, information sought from source agencies at the federal government tier will be acquired cooperatively under letter from a Second Commissioner of Taxation to the applicable Department Secretary.
In specific circumstances at the federal government tier, and for all state and territory governments and local government authorities, information will be acquired using the Commissioners’ legislative powers:
- Section 264 of the Income Tax Assessment Act 1936 (prior to 1 July 2015), and
- Section 353-10 of Schedule 1 to the Taxation Administration Act 1953.
These provisions relate to information to be used by the ATO for the administration of income tax and goods and services tax respectively. The ATO will use this information for taxation compliance purposes. This use is within the limits on the use of personal information imposed by Australian Privacy Principle (APP) 6, contained in Schedule 1 to the Privacy Act 1988.
14 Alternative methods
The ATO has considered a range of alternatives to the data matching program to reduce the risk to revenue as it relates to entities that had received taxable payments and grants from one of the three tiers of government. Using only ATO data is limited by the following factors:
- The ATO does not hold data on taxable government grants and payments.
- ATO data only covers entities that have an Australian Business Number or Tax File Number. This data will not identify entities that have never registered for an Australian Business Number or tax file number and are operating outside the taxation system.
- Some entities do not use the correct Australian and New Zealand Standard Industrial Classification code when applying for an Australian Business Number or lodging income tax returns. Also, where an entity is conducting more than one business activity, they would register under the Australian and New Zealand Standard Industrial Classification that is representative of the main business activity. Hence the Australian Business Register may not identify all those within this group.
Utilising external data from external organisations
The program focuses on those taxpayers outside the tax system by using the provided data to confirm taxation compliance and allow the ATO to appropriately target taxation non-compliance.
Likewise the ATO is less likely to approach those who are complying with their taxation obligations.
Some nominal costs
Data matching is an efficient and effective method of detecting and treating risks such as omitted income and non lodgment of returns
Public data matching notices allow the ATO to advertise areas under scrutiny to effectively promote voluntary compliance.
Public perception towards data matching
15 Pilot programs
A specific pilot program involving no more than 1,000 individuals may precede the data matching program. The purpose of the pilot program will be to test, inform and refine our approach before deployment across the broader population.
Earlier analysis of similar data matching programs at the Federal, State and Territory and Local tiers of government has identified non-compliant behaviour, including non-reporting of income, under reporting of income and non lodgment among recipients of government payments and grants.
A further attribute identified has been recipients receiving payments across multiple government authorities and borders. This has necessitated the ATO’s request to OAIC for a variation from data destruction requirements as outlined above (see section 10).
16 Costs and benefits
While the costs are minimal, 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.
The costs of the taxable government grants and payments data matching 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 – Sample taxpayer letter
You may not have included your <type> payments in your tax return<s>
Dear <Title> <Surname> <Sir/Madam>
We have received information from the <data source> that shows you received payments as detailed in the attached schedule. A review of your tax return<s> for the <year>< and ><year> financial year<s> indicates that you may not have included this income.
What you need to do
You need to review your payment<s> as we intend to adjust your tax return based on the information included in the schedule which shows amounts you declared and the proposed adjusted amounts.
- If you agree with the information in the schedule, you do not need to contact us. After <letter date plus 28 days> we will adjust your tax return<s> to include the amount<s> shown in the schedule<s> and issue you <with><a> notice<s> of amended assessment.
- If you disagree with the information in the schedule, you need to contact us by <letter date plus 28 days>. We will then let you know if you need to provide any supporting information.
Supporting information can be supplied to us by:
- fax on <fax number>
- email <email address>
- mail to
Australian Taxation Office
<Reply address line 1>
<Reply address line 2>
If you provide any supporting information, include <our reference>, your <tax file number><Australian business number> <TFN><ABN> and phone number on each page.
If we issue an amended assessment
- We will not apply a penalty. However if we identify other shortfall amounts when reviewing future tax returns a penalty may apply.
- You may have to pay a shortfall interest charge. Interest is calculated from the date tax was due on the original assessment until the day before we issue the amended assessment.
- You will need to pay any tax owing by the due date of the amended assessment or a general interest charge will apply.
- You can request a review of our decision if you believe the assessment is incorrect and you have information not previously available to us. Your objection rights will not be affected by this review.
For more information
If you have any questions please phone <13 28 69> between <8.00am> and <5.00pm> <Eastern Standard Time><Eastern Daylight Time>, <Monday to Friday> and ask for extension <number> or phone us direct on <telephone number>.
What you need if you phone us
We need to know we are talking to the right person before we can discuss your tax affairs. We will ask for details to verify we are talking to you or an authorised person. An authorised person is someone who you have previously told us can act on your behalf. It will help if you quote ‘Our reference’, which you will find at the top of this letter. If you can, please have your tax file number with you.
<Deputy Commissioner’s Name>
Deputy Commissioner of Taxation
Appendix B. Gazette notice
Commissioner of Taxation
NOTICE OF A DATA MATCHING PROGRAM
This gazette notice replaces the following notices:
- Local Government Contractor Payments – published 28 January 2014 (C2014G00139)
- Childcare & Educator Payments – 2 April 2014 (C2014G00566)
- Queensland Government Contactor Payments – 2 April 2014 (C2014G00567)
The Australian Taxation Office (ATO) will acquire details of entities receiving taxable grants and payments from various Federal, State and Territory and Local Government departments, agencies and authorities.
These will be electronically matched with certain sections of ATO data holdings to identify non- compliance with lodgment and payment obligations under taxation law. Records matched under this program will exceed 5,000 individuals throughout Australia.
This program is titled the ‘Taxable Government Grants and Payments Data Matching Program’ and it enables the ATO to:
- identify and test the correct taxation reporting by recipients of taxable Government grants and payments from agencies across the Federal, State and Local levels of government; and
- identify areas that require improved educational and compliance strategies to encourage voluntary compliance for recipients of Government payments and grants.
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:
- visiting www.ato.gov.au/dmprotocols
- emailing SpecialPurposeDataSteward@ato.gov.au with reference to the Taxable Government Grants and Payments data matching program.
The ATO complies with the Office of the Australian Information Commissioner’s Guidelines on Data Matching in Australian Government Administration which includes standards for data matching to protect the privacy of individuals.Taxable government grants and payments data matching program protocol