Having an updated social media profile with your personal and career updates has got a lot more to do beyond the likes and shares you receive. Confused? What if we told you a single social media post about your recent purchases, vacation, or monetary achievement can trigger a tax audit and inspection by the Australian Taxation Office (ATO)? Beyond an entertainment forum, social media is recognised as a potential tool by the Australian government agencies to keep track of individuals undisclosed wealth. Pursuing a lifestyle that does not match the declared income can lead you to legal conflicts and tax audits, where you have to explain the source of the undeclared income and other financial details.
In this blog, we’ll delve into the types of social media posts that can trigger a tax audit and how to ensure compliance with the ATO rules.
Social Media Posts That Put Your Business on the ATO’s Radar
- Lavish Lifestyles: Sharing images of luxury purchases, designer clothes, expensive cars, or other vehicles, and frequent vacations while reporting a low income is one of the primary reasons for a cross-check of data by the ATO.
- Passive Income: Not accounting rental incomes as part of the disclosed income tax leads to multiple data checks of the filed income tax against the rental records and data from property managers.
- Government Employees: If you are an officeholder in the Australian government, there are high chances of your account getting flagged, as ATO keeps in tight checks of your social media posts. Any small discrepancies sighted are sure to land you in challenging times, owing to your role and responsibilities in tax obligations.
Overall, if you think social media is just a platform to share personal success and holiday joys, in the event of low income claims, then be assured the ATO is clearly at your back looking for non-compliant taxpayers.
Laws Governing the ATO’s Social Media Audit
As the primary tax regulatory body in Australia, the ATO takes complete responsibility for ensuring taxpayers are well compliant with the latest tax rules and regulations by utilising data-matching programs, where they cross-check the data obtained from third-party agencies against the available income tax records. This way, ATO makes sure there is no room for any kind of malicious practices that disturb the integrity of the Australian tax system and sincere taxpayers.
To conduct such verification, the following are the laws the ATO should abide by in its data matching programs.
- The Privacy Act 1988, as it sets guidelines for the collection, handling, usage, and disclosure of personal data. The law also regulates access to this sensitive information, preventing unauthorised agencies or users from accessing it. Under this act, the ATO has been granted the authority to scrutinise the publicly available social media posts for investigations, including tax compliance.
- Under the secrecy provision of the Income Tax Assessment Act 1936, the ATO is compelled to not disclose the taxpayer information unless and until the law or court demands. If the ATO triggers any tax audit by analysing the social media activity, they are compliant to follow the legal secrecy rules while handling the data.
- The Taxation Administration Act 1953 outlines the key frameworks for individuals and businesses to lodge, pay, and report tax returns. Any deviation from this allows the ATO to utilise the data-matching programs to investigate legal matters, conduct audits, and enforce compliance. This way, the law ensures ATO legally identifies any undeclared income, false transactions, or tax evasion.
In addition to the above laws, the ATO must also comply with the guidelines set by the Privacy Commissioner for its data-matching programs. This is achieved through specific protocols for each program, where the ATO explains the purpose of the data matching, how the data will be managed, and the extent of its access.
How To Avoid an ATO Audit Due To Social Media Activity
In the era of social media and digital diaries, sharing personal victories and memories with virtual friends is inevitable, but are you worried about tax audits and legal conflicts? Well, here are a few strategies on how you could encounter a tax trigger from the ATO.
- Report all forms of income: Staying transparent with the Australian government by declaring the correct amount of salary, business accounts, and passive incomes will help you and your business navigate all types of social media triggers and tax audits.
- Maintain proper business records: Keeping invoices, receipts, and other bills in good condition ensures your business has the right support in the event of any legal claims and tax deductions.
- Seek professional advice: Having a certified tax accountant helps ensure your business strictly adheres to the latest tax rules and regulations. As professionals, they will educate you on the pros and cons of social media activity and also guide you on the importance of tax obligations and compliance.
- Register for an Australian Business Number (ABN): Failing to register for an ABN number may expose your business to certain tax audits. Under the Australian tax law, owning an ABN is necessary for it helps in proving your business is legitimate and compliant.
Conclusion
To conclude, as responsible citizens, it is important to abide by the rules and regulations of the Australian tax law by providing accurate details of income and other assets. Any deviation from the disclosed income may trigger an ATO scrutiny, leading to tax audits and other tax claims and investigations. To prevent tax evasion, businesses are encouraged to work with a professional tax consultant, such as Accountants Direct, who assists in regularly reconciling reported income with third-party records. The certified accountants will also help in educating clients about the necessity of holding the right documents for every expensive purchase and lavish lifestyle. This way, your business can navigate the social media triggers conducted by the ATO.
Schedule a call with our experts at Accountants Direct to gain deeper insights into ATO tax audits for social media activities and ensure your business stays compliant.
