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The Tax Office’s ever-increasing data-matching capabilities means tax practitioners need to be pushing clients for contemporaneous and thorough records, particularly as the agency places a focus on capital gains tax.
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Practitioners cautioned ahead of ATO’s CGT focus
29 May 2019
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Speaking to Accountants Daily, HWL Ebsworth Lawyers senior associate Vincent Liccardi said the ATO’s increased focus on CGT stems from its increasing data-matching abilities, as well as new international agreements — such as the Common Reporting Standard — which will allow the Tax Office to scrutinise tax information with foreign jurisdictions.
“The ATO can readily access information, including historical data, about artwork, shares, cryptocurrency and property, and compare that information to a client’s tax return,” Mr Liccardi said.
“Importantly, data is also collected by the ATO from overseas, and therefore, tax advisers should ask clients about whether they also own foreign assets.
“My experience has been that clients who face the biggest difficulties with the ATO are those who do not keep thorough records. I recommend that tax advisers seek support to properly document transactions.”
He added: “It is particularly important for clients who have carried forward capital losses to ensure that they have records of the transaction giving rise to the loss, including how the loss was calculated. The ATO may want to review the transaction giving rise to the loss even if it is from a long time ago, and could reject a client’s claim if the loss cannot be substantiated. The ATO recommends that evidence of a loss should be retained for at least five years after the loss is claimed and not when the transaction giving rise to the loss occurred.”
With the ATO placing a focus on CGT in relation to shares, property and cryptocurrency, Mr Liccardi said advisers should be urging clients to locate and produce records ahead of potential queries from the Tax Office.
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Cryptocurrency, in particular, will be of particular focus for the ATO this year after it announced that records relating to between 500,000 and 1 million individuals will be obtained, giving the agency visibility over whether taxpayers are correctly meeting their taxation and superannuation obligations in relation to cryptocurrency transactions and ownership.
Mr Liccardi, a former ATO technical director, said advisers should run through a checklist with clients ahead of tax time 2019, including asking whether any crypto transactions have been made; whether it was for private, investment or business use; the specifics around the purchase, sale or exchange transaction; the “cost” to buy the crypto and the “price” it was disposed for; and whether any crypto was lost or stolen during the 2019 year.
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