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Tax Tip 14 July 2008
ATO tools for detecting unreported cash transactions
Detecting unreported cash transactions is a high priority for the ATO and, year by year, the ATI is improving its tools to deal with it. In particular, the ATO is using new strategies such as:
- extensive use of data matching to identify people whose lifestyles appear conspicuously out of step with their reported income;
- cross matching data from Centrelink, child support agencies and state fair trading agencies to assist in identifying unreported income; and
- increased use of computer-assisted risk evaluation processes to more accurately identify high risk cash economy participants for compliance follow up.
The combination of technology and growing interagency cooperation is also enabling the ATO to use an array of federal and state government data to match against its own tax records more effectively.
For example, the ATO is now obtaining records of purchases of luxury goods (such as cars and boats) from state government agencies and comparing them against income declared by the purchaser.
Data matching and industry benchmarks (as noted in another Tax Tip) enable the ATO to better get to grips with the cash economy - rather than simply accepting income as declared, it can examine actual spending patterns and question taxpayer compliance behaviours.
The ATO has also indicated that it is 'drilling deeper' into areas that have, over the years, been more prone to the cash economy activity – such as building and construction; the taxi industry; and restaurants and cafes. | 
