On 30 October 2018, the ATO posted the following statement on its latest data matching protocol, which will see the ATO continue to receive share data from the Australian Securities and Investment Commission (ASIC).
The data includes details of the price, quantity and time of individual trades dating back to 2014, with more than 500 million records obtained. The information complements information that the ATO already holds from brokers, share registries and exchanges, Assistant Commissioner Kath Anderson said.
The ATO uses sophisticated technology to match the data against information reported in tax returns and other ATO records to detect taxpayers who have not properly reported the sale or transfer of shares as income or capital gains in their income tax returns. This is high on the ATO’s priority list given more than 5 million Australians. Almost one third of all Australian adults own shares, and there is evidence that some taxpayers are getting it wrong when it comes to reporting their capital gains or losses from the sale of shares.
The ATO will ‘prefil’ share sale information in tax returns, which ought to help ensure that no taxpayer is caught by surprise. “We want to help taxpayers and agents to get returns right.” Taxpayers contacted by the ATO will be given the opportunity to verify information collected from data providers before any compliance action is undertaken and will be given at least 28 days to clarify any information obtained.
Genuine errors can sometimes be corrected without penalty. And, in any event, a ‘voluntary disclosure’ also entitles a taxpayer to an 80% reduction in administrative penalties based on the ‘shortfall’ in tax, which flowed from the error. For instance, a careless mistake would normally attract a shortfall penalty of 25% (s284-90(1), item 3, of the TAA), but a shortfall, arising from a voluntary disclosure, would bear bear only a 5% penalty (viz: an 80% reduction – s284-225(3) of the TAA).
Simple rules can avoid share sale mistakes (the ATO says).
- First, make sure you keep good records of share purchase and sale prices, as well as costs like brokerage fees. If you sold part of your share holdings, you will need to keep records of the parcel you sold and the parcel you are still holding. This information is critical in calculating your capital losses or income gains.
- Second, make sure you declare your capital gains in your tax return.
- Third, if you have made a capital loss this year, remember you cannot claim it as a deduction in your return. However, you can offset the loss against any capital gains you make this year, and if there is any loss remaining you can carry it forward to reduce any future capital gains you make.
[Federal Register of Legislation: Notice of Data Matching – 29 Oct Gazette; ATO website: Comments on New Notice, Data Matching Strategies generally; LTN 209, 30/10/18; Tax Month – November 2018]
FJM 11.11.18
CPD questions (answers available)
- Is the ‘news’ here that the Commissioner has extended his ‘data collection’ for checking the correctness of reported share sale gains and losses?
- How many records did the Commissioner collect from this new source?
- Does the Commissioner have to ‘Gazette’ notice of his data collection?
- How many Australians own shares?
- How much does a ‘voluntary disclosure’ of a mistake, in a return, reduce the penalty for the resulting shortfall in primary tax?
- What are the two types of gains, one could make on selling shares?
- Do you get a ‘deduction’ for a capital gains (that you can deduct, from your assessable income, when calculating ‘taxable income’?
