ATO's 600 Million Data Points

Jason · 00:00Welcome to episode 251 over the Numbers game. I'm Jace. I'm here with Nick and Marty. And guys, I wanna open up with a question to you guys. What does 600 million have to do with the A TO, the number 600 million? Oh.

Nick · 00:14600 million. 600 million. Is that how much they, they gave away job keeper?

Marty · 00:21Is that what, is that what we owe 'em?

Jason · 00:22Nah, no. We're at, we're at f we're at 53 billion, uh, Marty in, uh, in, in debt for, for uh, you know, so 53 billion in debt, so no. 600 million. Oof. I think the government would jump at that number if they could have that in debt. Block it away. All done. Um, 600 million is also not the number of help. Debt and hex debt reduction that's been passed in Parliament, the 20% help debt reduction.

Jason · 00:44Stop teasing us. Come on. No, guys. 600 million is one of the recent estimates of the amount of data points that feed into the a TO, all the information that the A TO have on the general Australian public now. The headline and the reason this one kind of, uh, came to light a little bit more is that one of the most recent businesses that has come on board and started feeding and and developed the technology and the AI and everything that it needs to feed the data in is actually do, do you guys wanna guess the, the business that is now giving the a TO data about its customers and users.

Jason · 01:18Not,

Marty · 01:19not Palant here, is it Red Tube?

Jason · 01:23Very, very, very close. Nick. It is OnlyFans. So o OnlyFans, you know, and this, you know, we don't laugh about the atos access to data. This is a genuine warning to the general public out there. And, and you know, uh, there is a, there's a specialist accounting firm called Empire Industry.

Jason · 01:44Um, finance, I think it is something like this. They, they look after OnlyFans, uh, models and, and, and people who use OnlyFans to generate income. But for people out there who maybe haven't been working with an accountant and you know, they're on OnlyFans and they've, you know, there's some side income, like any other side hustle, the HO is now being fed.

Jason · 02:02The income that you are earning, the, the gross revenue that is coming through your OnlyFans profile. Now, I, I use that as an example 'cause you know, realistically it's just another one that's added. You know, you think about Airbnb, um, dd, Uber, Airtasker, Fiverr, Upwork. There are so many different companies out there, Etsy.

Jason · 02:23eBay. So Marty, you know, I see your little James heard thing on the wall there. I think it's, I think it's Hery, but yeah. You know, if you dec, if you decided to go and chuck a hundred of your framed things on eBay and you have started to make a profit on that and maybe the a TO decides it's not a hoppy anymore.

Jason · 02:38Marty, you are running a business. eBay is sending your user id. Your sales records that flows through to the a TO as well, and maybe one day they decide that your little picture frame selling hobby isn't a hobby anymore and they come after you for some tax.

Marty · 02:52Well, hang on. I I was about to flo this picture.

Marty · 02:54So what, what do you saying? Can I do? No, I don't think get 20 bucks. But what, uh, what is considered a hobby is, is like a one-off, define the lines of hobby and business.

Jason · 03:09It's very gray, like our entire Australian tax system, Marty, it is a very gray self-assessment system. No, to give you the answer on that, a, a hobby is genuinely something that you are not trying to run an enterprise to make a profit.

Jason · 03:21So if by the time you, you know, make some goods that you're gonna sell at the local market and it costs you $10 to make them, and you sell 'em for 11 and it buys you a cup of coffee after the market, probably not really an enterprise that is a profit making activity

Marty · 03:35really. So

Jason · 03:36you need to, well.

Marty · 03:38Uh, well, I mean, that's, that's gray 'cause that you just described business.

Marty · 03:41No, it was, it's

Jason · 03:42it is gray. Yeah. But yeah. Well, I mean, again, anything that looks like a business and is like a business, uh, and, and has the makings of a business, you gotta be careful. Yeah. Register an abn, declare it anyway. Um, you know, show that it's breakeven or a loss. Um, but yeah, the, the hobby versus business thing is something that comes up all the time.

Jason · 03:58Um, you know, an example, and this one, you know, I need to check if the a EO gets this data, but we had a customer that buys and sells domain names. And I didn't know about it. You know, they kept it off to the side and, and all of a sudden they'd made a seriously big win on a domain name that sold for tens of thousands of dollars.

Jason · 04:13And when I questioned whether we were declaring that in the tax return for that year, um, I was told no, it's a hobby. And then once I unpacked the sheer volume of domain names that were being bought and sold, I'm like, uh, far from a hobby that that's an enterprise. Like you are deliberately buying and selling domain names to make a profit.

Jason · 04:30So, so is

Nick · 04:31there a, um, I'm just thinking about dollar

Jason · 04:33value threshold.

Nick · 04:35Yeah. Is it transactions dollar value?

Jason · 04:38It, it's more, it's mabo. It's the vibe,

Nick · 04:40intention,

Jason · 04:41intention. If your intention is to generate profit and make an income, it's a, you're running a business. It's not a hobby anymore.

Nick · 04:48License plates are the same.

Nick · 04:49I've, there's a lot of people into that game. Buying and selling, uh, car license plates.

Jason · 04:54Yep,

Nick · 04:55yep. Correct. So,

Jason · 04:56getting back on track, 'cause this, this stuff for me, we can go all different directions. So essentially, you know, what I wanted to get to was share a bit of information of why it's important and why this matters to everyday Australians.

Jason · 05:06Because there is a lot of taxpayers out there that'll either lodge their own tax return or they'll go to an accountant like Future Advisory and many other good ones out there to get their tax return done. Their accountants will ask them questions and ask them for records, and a lot of the time clients will say, yeah, yeah, yeah, that's the number.

Jason · 05:21All good. But I wanted to kinda share why it's really important to get these numbers right and essentially, you know, one of the main ones is obviously the A TO uses these 600 million data points to pre-fill. Your tax return and, and then it gives us accountants a bit of a head start to go. We know your single touch payroll information or your income statement used to be the old pay as you go withholding summary.

Jason · 05:42Um, we know interest withhold from banks. We know your, usually your private health insurance details. We can see if you've bought and sold shares. You know, and I'll get into the details of just how much info this is. But essentially the reason the A TO is building out more and more capability in this area, they've invested a lot of money into ai, machine learning and big data capability.

Jason · 06:04And as a result of this, what has ended up happening is last year alone, nearly 500,000 tax returns were automatically amended and changed on behalf of the A TO, and then the people who messed up their tax returns were sent a bill. So if you could imagine that this is only gonna get more and more advanced as the a T's data matching capability continues to turn on and ramp up, if it was 500,000 last year.

Jason · 06:28Imagine how many more numbers we could get to this year with all of the, uh, activity around cross matching income streams. And

Nick · 06:34so. They're not feeding this information to you, the a TO,

Jason · 06:39there's both versions. Yes, we get a lot of it, but not always in time by the time we lodge a person's tax return. So you gotta also remember that a lot of people rush to get their tax return done 'cause they, they want their refund, which then means that the, you know, the accountant has to go a on, you know, your income protection number for example.

Jason · 06:57Are you sure that was your income protection premium? Yep. Yep. All good. I checked with my advisor, but. If it's not income protection data goes to the A-T-O-A-T-O data matches it. You put in 200 bucks a month, but it was really 180 8 per month, less the non-deductible part for life insurance or whatever it ends up being.

Jason · 07:14So there's some pretty differences that don't seem like a lot. But all of a sudden, if it starts to add up that you're putting in the wrong information in your tax return, you pretty much, uh, become a pretty easy target for further a TO scrutiny, um, for an audit for example, where then you're gonna have to show you kept all your receipts for your tax deductions and so on and so forth.

Jason · 07:32So you don't wanna be in that boat. You wanna make sure the data you are matching definitely matches what the a TO is gonna end up with. I'll, unless you guys have any questions, I'll share you in where some of it gets a little bit, uh, prickly and interesting as we kind of go into it. Uh, any questions in the meantime while I find my exhaustive notes to, to you about, I,

Marty · 07:51I think you're about to answer it, but I was gonna say, how, um, how correct is the data the tax office is getting on people?

Marty · 07:58Like is it to the t.

Jason · 08:00Yeah, look, because I would hate to

Marty · 08:02think we'd be wasting time back and forth on stuff that's not actually, you know, to advantage of, of ev everyone.

Jason · 08:10Well, Marty, I am. Definitely not an A TO spokesman. I'm definitely not out to bash the a TO, but sometimes with machines, with machines and ai, these things go wrong.

Jason · 08:20So what you've gotta imagine is from a data matching point of view, where these things can go wrong is human error as well. So let's say you've got an investment property and it's in your name and Colleen's name, but for some reason the real estate agent only puts your name on the document for your income and expenditure statement.

Jason · 08:37If the a TO is then expecting you to declare the full income of your investment property, but it half goes onto Colleen's, um, tax return, you may get triggered an automated amendment or a question for a review because you didn't put the right income in, is what the a TO was expecting. But it's not the a t's fault and it's not your fault.

Jason · 08:54It's part of the data matching process fell over because the wrong names were put on something. Yeah.

Marty · 08:59Okay. Um.

Jason · 09:00That's a little example. I'll share you through a bit of a list of, of where this stuff starts to get pretty crazy. Um, obviously we touched on it before, but Uber, Airbnb, Fiverr, Upwork, some people start a little Fiverr Upwork account thinking it's a little bit of a side hustle for some extra cash.

Jason · 09:15You know, they can build some, you know, do some stuff on the side and especially, um, graphic designers, things like that. In the past, that was some little slush money that came in on the side that people might not have been declaring. It now is known by the a TO. You're not getting away with it. You need to declare all that information.

Jason · 09:32The beyond, you know the details they're getting is, you know, your income earned, your user id, your activity records. So also think about it, if you've got an investment property that you Airbnb and you told the a TO, it was available for rent 300 out of 365 days. The A TO gets the data from Airbnb if that property was available for rent or not.

Jason · 09:52So you gotta remember that if you are not pro rider, the private use of your holiday home, the a TO will end up with that data and be able to pretty much scrutinize what you've lodged and then amend to ensure you are not getting a, a bigger deduction than you should have been. As an example of what happens with the ride share and Airbnbs and they're a big one.

Jason · 10:11That's a big one. 'cause a lot of people do have a holiday house that is privately used, but also Airbnb on the side. If you get those numbers wrong, it severely impacts the deductibility of the interest on your, um, investment property loan.

Marty · 10:23Jace, what should we be doing with the vehicle log? In regards to cars for your business in regards to tracking kilometers effectively for the tax office perspective, because that's always been one where people have been right in log books and I know there's tech now that can Yep.

Marty · 10:38Lock in the, yeah,

Jason · 10:39the, the best tech. The best tech I say and, and I'm all for using tech to automate it. It's called Driver's Note. And you can subscribe to it. And they send you out a, a Bluetooth dongle that can sit in your car. Yep. And it means every time you get in and out of the car, it sends the data to your phone so you can, then it has a popup that says, was that a business use or private use?

Marty · 10:57Right. And

Jason · 10:58for, for 12 weeks, you use your driver's note app and technology to record your 12 weeks worth of driving, and that becomes your log book for your motor vehicle claims. Um. Again, though, if you've got a Nova lease, don't try and get cheeky and claim a tax deduction for your car as well. 'cause the a TO knows about your Nova lease, uh, they've got that data too.

Jason · 11:17Uh, but great question. But it,

Marty · 11:18but, but basically you could, yeah, it'll, it'll track from when you're at the office to where you are going and then you would document that on the, on the app. Yeah, that, that, that makes sense. Bad idea mate. Have you got that?

Nick · 11:30No. I'll, I'll, I'll stick with the logbook. Thanks.

Jason · 11:32Yes, yes. I was about to say, some people don't like the technology side where everything is IP address here and IP address there. They may like it.

Marty · 11:38Yeah. Yeah.

Jason · 11:39They may like to be a little bit more, uh, loose with their logbook entries, but, but

Marty · 11:43600 million points, uh, going. Yeah. You know what I mean? But you wanna get it

Jason · 11:47right.

Jason · 11:47And, and I'm here to say you do wanna get it right. I've seen audits or reviews where the a TO grabs the log book, and if they can pick the wrong date, the wrong time, the wrong amount of kilometers, they'll throw the whole thing out and just say. Like that. You, you obviously didn't do logbook properly, so like as log and a motor vehicle claim can be one of the biggest things you can get as a, as an employee.

Jason · 12:07Especially if you know, you're, you're in trades or you're in sales and you're genuinely driving a lot for work. You wanna be able to claim everything you're entitled to to get the biggest chunk of your tax refund back that you are legally entitled to. Some of the other ones, well I can get through 'cause there is a bit of a, a list, um, cryptocurrency.

Jason · 12:24So since I think 2019, there's been millions of cryptocurrency transactions that have been fed through to the a TO. Uh, when you think of, if, you know if your wallet is with Coin Spot, coin Jar, Binance, these are all platforms that are sending your personal information, your transaction details, your wallet addresses, transaction dates, and times transaction types, and the types of coins.

Jason · 12:47All fed to the a TO. So I think initially when, you know, cryptocurrency came out, it was seen as a bit of a, I'm gonna keep this private. You know, cryptocurrency is designed to buck away from the system a bit. Essentially. It's a legit, you know, if it's gonna continue to be legit and continue to grow, like, I mean, look at the price of Bitcoin at the moment.

Jason · 13:04It's, it's, it's just. Going off. So, but keep in mind where big Bitcoin prices, for example, you transact or move that and you've been riding it for a long time, big CGT event and essentially potentially a big tax bill. So you don't wanna get that wrong and have the A TO come after you a few years later.

Jason · 13:23And another one where we've seen people really get in strife is they've made a big Bitcoin gain, but they've moved it into another coin, which is then. Dropped in value. The a TO doesn't care that you lost money after the fact. The a TO recognizes that you made a capital gain. So then let's say capital gain happened first.

Jason · 13:39You got a tax payable. Capital loss generally for some of these people happened years down the track, but they never actually cashed out the money. So it's, it's a real sad situation where you might have a couple of hundred thousand dollars tax bill, but you never actually recoup the cash. Now these are some war stories from in the past, but again, the HR has the data.

Jason · 13:57The HO will eventually catch up with you if you haven't reported your crypto transactions properly.

Nick · 14:02And to be clear on the crypto stuff, there's no, there's no gray area as to whether or not it's a hobby. One track transaction on crypto is it's investment income.

Jason · 14:13I will back, I, I'll stop you there and move back a little bit.

Jason · 14:17There is purchasing of crypto for personal use asset, so if you genuinely put some money in. I think the value is under 10,000. I'll, I'll check it and then verify this, but look up personal use asset, cryptocurrency. That's where you need to look up and understand if you deliberately, it's like, um, how do I put it?

Jason · 14:35If you put money into, uh, Bitcoin because you were gonna spend it and it went from being worth 5,000 to 50,000, you can spend that 50,000. Use that for a renovation, whatever you wanted, because it's a personal use asset. You, you bought it to use personally to buy something.

Nick · 14:52Mm-hmm. Mm-hmm. The

Jason · 14:53change in value to certain limits falls under the personal use asset criteria, so check out the thresholds on all of that.

Jason · 15:00Definitely worth looking into because some people, you know, I had a client reach out that did generally put some money into crypto, not because they wanted to hold onto it and make a capital gain. They put some money into crypto to spend it. It was cash for them to spend and now it's gone up in value and they're gonna spend it on a renovation.

Jason · 15:16Um. Again, personal use asset. So, good question Nick, and one for everyone to kind of understand.

Marty · 15:23Very good question. Now, beyond

Jason · 15:24that, um, look, I mean, as I said, 600 million data points. I don't wanna keep you guys, uh, here too long, but it's, uh, for me, I'm super interested in this stuff and, and I deal with it every day.

Jason · 15:32So, uh, hopefully there's a bit of a Jason

Marty · 15:35bar talking about, uh, historic transactions is the a TO focused on looking back over 2020 3, 22, 21, 20.

Jason · 15:44Fantastic, and, and absolutely bang on question. It's actually, that's the, the years at the moment, the a TO is, um, trolling through that data. So essentially there is such a backlog.

Jason · 15:55Again, think about these hundreds of millions of data points. It also means it takes time to cross reference, cross match and ID things and. And unfortunately for the accountants and the professionals out there, this is causing extra work for us. Um, and sometimes it's not always right. Like I said, and a real life example is we are currently getting letters for 2023 tax returns where the A TO is saying to me that our client got it wrong and the A is gonna amend unless we say otherwise.

Jason · 16:25So if we don't respond to these letters, the HR will automatically change it and send a bill to clients. Now, luckily, as proactive, uh, accountants and advisors, we are then contacting our clients. Um, this example one was Medicare levy surcharge. Our client definitely had private health insurance. We put the private health insurance on the tax return back in 2023.

Jason · 16:43But since then, the atos come along and said, no, it doesn't match the data we've received. You're not getting the Medicare levy, um, surcharge, um, offset. You know, you're, you're gonna pay the Medicare levy surcharge. So we've now had to go to the client, request the statement, and provide the statement back to the ATO o to say, sorry.

Jason · 16:59Whatever data you've got is wrong. Here's the physical source document. And then now that should stop the a TO from automatically amending. Um, the warning, I guess, to people out there is if you don't have an accountant, if you've lodged it yourself or you know, your accountant may be busy and can't get to every bit of mail, the a TO sends and they've forwarded it onto you without necessarily having a good look at it.

Jason · 17:16You need to be, um, vigilant across a TO mail. They automatically sending these Auto Amendment notices to you. And if you know that you are in the right, you need to contact them back and say, no, don't amend my tax return. I've got the data that says I'm correct, and here it is. Um, you know, but that, that's happening.

Jason · 17:32People are getting bills to pay and I've seen, I've seen somebody just pay it. Not argue it, not, not question, it just go, well, I must have given the wrong info. I'll pay that tax bill. Um, definitely a big issue out there and we can use all the technology, the ai, and the machine learning to try and make this process easier and better.

Jason · 17:47But it is still gonna get things wrong and require humans to come back and, and determine what was right and what was wrong.

Marty · 17:53True.

Jason · 17:53Next one's an easy one, but financial institutions, your bank is sending your data, the, the data to the a TO. So interest earned on accounts, dividends received financial transactions, um, you know, opening and closing bank accounts, uh, and loans.

Jason · 18:07Um, guess crop gets, the information's generally for interest earned is fed into the tax return. What's not? Exactly fed in is interest expense. So if you've got an interest expense on a, an investment property loan, where you need to be careful though is redraw. If you've got a redraw on an investment property loan and you've paid it down and then redraw, that is a huge no-no, obviously, because if whatever you've redraw it for.

Jason · 18:30Then, you know, if you've paid down the value of that loan, you've reduced the tax deductibility of that investment property loan. If you redraw money back out, it doesn't mean that you've refreshed that loan idiot to claim the deduction. Um, so one to watch out for the a EO has this data,

Nick · 18:44so they've got the data on balances.

Nick · 18:48But they're not feeding the interest data through. No.

Jason · 18:50So interest expense, I mean, would make sense, wouldn't it? If they've already know the interest expense, just populate it into the rental property schedule, but they just don't have the connection to that. So interest income is a very set, you know, I item and, and it's, you know, fed in, when you think about it as well though, one particular loan might be used across two properties.

Jason · 19:09Um, so you might have the one loan with the bank, but part of that redraw has then gone onto another property. So, yeah, I mean. As much as some of it would make sense to just pre-fill straight into the one particular rental property. Unfortunately, it's not that easy. And then you have multiple loans for some, um.

Jason · 19:25But again, it's one where we've seen people get it really wrong, where the loan might be, you know, only one person's name, but the investment properties in husband and wife's name, that that doesn't mean you get to split that loan in half and claim it on both rental schedules. It means that sometimes there's a non-deductible portion of that loan.

Jason · 19:41So structuring your loan properly with your mortgage broker and making sure your accountants aware of what's happening is, is a big, uh, big top tip there. Beyond that insurance companies. So this is where, uh, from an audit activity point of view, um, you know, this, this one always kind of gets me if, uh, you're, let's say you're in a bit of an industry where there's some cash and you decide to buy a jet ski or a boat or a nice hobby car for the weekend, and you go and insure.

Jason · 20:08The jet ski and the boat and the car, the a TO gets the insurance data. The a TO knows the value of property that you have insured, and if your taxable income does it match the taxable value of all of the property that you've insured. There's some, uh, flags and alarm bells, uh, that the a o could consider auditing you to understand why your taxable income doesn't match the taxable value of properties you've got.

Jason · 20:34Beyond that in insurance though as well, you know, you guys would be well aware of income protection insurance. Your income protection premiums are often tax deductible, but sometimes there's little bits in there that aren't deductible, you know, the to do with life or TPD and other amounts. Um, so it's very important, you know, our team are usually annoying the innovate team saying, Hey, can we get the letter for what is the deductible premium?

Jason · 20:54You need to make sure you get that. 'cause the a EO knows that after the fact, again, it could be a couple of months later, but the a EO has that data and could be a bit of annoying one to unravel. Big one here. Um, you know, this one was not, not news to me, but I never kind of overly thought about the implications.

Jason · 21:10Um, services Australia, department of Home Affairs and State Revenue Officers. So government agencies cross collect, cross share data, obviously with a TO, um, obviously for income support payments. Um, if, if two people are living together, but one of them said they're a single parenting payment, but they're now living with, uh, somebody else.

Jason · 21:28Raises some alarm bells of whether they're a single parent anymore. Um, and then visa records, your residency status and how long you spent in the country can determine whether you're an Australian resident for tax purposes. So for some people that are digital nomads or moving overseas or, you know, have gone somewhere for a longer period of time, but then decided, oh, it's, you know, the Australian tax rate's better, I'm gonna come back to Australia and sort my tax return out.

Jason · 21:52The a TO can have the data that shows how long you were out of the country for. And then they may have some questions about what income were you earning overseas and are you declaring your worldwide income in Australia? So HO is watching guys. There is a lot of data and info there.

Marty · 22:07Yeah. People, people even buying property in their self-managed super fund and then working overseas, I know there's criteria is around how long you can hold that for and yeah, that, that information is in real time now back to the a TO office.

Marty · 22:18So you do have to be careful on stuff like that. Yeah.

Jason · 22:20But that, that was my next one, property and investment data. You know, the, the properties you buy, the properties you sell is all fed to the a TO. The price that you bought it for, the price that you sell it for. Um, state government usually has the stamp duty amount, so you know, again, you, if you get it wrong, the CGT that you've put in, if the a TO wants to review it, and, and again, not, they don't have all the power in the world to do all these things.

Jason · 22:43By robots or ai. But again, if you are selected for a review and you've put in the wrong information, it's not too hard for them to figure that out based on the amount of data they have on their side. Also comes with, you know, rental income, investment earnings. All these things need to be really accurately done for tax reporting.

Jason · 22:59'cause you know. Atos got access to the data. If they wanna figure out you've done something wrong, they can and they will. Um, and that's where I said, as I said before, getting the names right and the ownership records right for properties is really important too. Now that, you know, the income and expenditure statement is being from a real estate agent is going to the a TO, and I can't tell you how many times it's caused an issue in the early days of the loan is in one name.

Jason · 23:22The property's in somebody else's name, you know, and the real estate agent puts something else in a different person's name or the spelling and, and overall, you know, of it all. And it just creates havoc in all the data matching and, and causes way too many phone calls and record requests.

Marty · 23:35So, so Jace, I've got no problem with the tax office getting their legitimate taxes and, you know, finding what, what the real.

Marty · 23:43Truth is of the matter because that's just fair and reasonable business. What interests me is just the education piece to people in regards to how to, how is this being communicated to people in the general public so they can be doing well, they should be doing the right things, but not everyone probably would be, but how that that can best work in with the A A TO now is that the accountant's responsibility to educate are, are you the middle man in this that you are trying to.

Marty · 24:10Piece it all together for both sides. The, the sort of the me, like the, the middle ground. Like where's this responsibility? Like, 'cause it lies really with the client, doesn't it? With the, with the, with the person. Yeah.

Jason · 24:22Look at end of the day, it, it ends with the taxpayer. Taxpayer signs, the return, taxpayer lodges their own return.

Jason · 24:27Um, a TO is a self-assessment system where the taxpayer is given a lot of trust and faith into lodging their records accurately and correctly. Um, so, you know, yes, but I also then believe from an education point of view, the A TO. The general accounting profession, you know, CPAs, cas, public practice accountants.

Jason · 24:45We all have a, a responsibility to make sure we're sharing the appropriate information and giving the appropriate warnings to our customers or our clients that are lodging through us. And I say us as in the whole accounting population, um, that, you know, you gotta get this stuff right and you've gotta give the appropriate warnings to clients when you know, Hey, look, I've, I've done tax returns before.

Jason · 25:06It's like, yeah, Jace, everything's the same as last year. Just bang it all through. It's okay. Like I get it. Everything may be the same, but you know, last year you bought a pair of boots for 220 bucks. Were they exactly the same price again, sorry to be a pain in the ass, but I don't wanna put in two 20 if they were two 50 or one 90.

Jason · 25:22And I know that's, you know, a stickler, but

Marty · 25:24tell, tell me something, Jace, one more question. Uh, yeah mate. In regards to. Um, audit insurance. No matter how good your accountant is, is there something you should pay for, given what's going on? Given it's for some peace of mind? Uh, from your perspective? From your perspective?

Marty · 25:43I dunno, I've, I've never paid it in the past. No. We, we

Jason · 25:47have had some,

Marty · 25:48but you are scaring me. Just, just in general because it could be wrong or right or whatever.

Jason · 25:52The, the amount of things that actually go to audit are low. As I said, the a o just automatically changes it and then makes it your responsibility to sort it out.

Jason · 26:00When things go to audit, that's a bit of a different process where audit insurance will cover the time of your accountant to go into bat for you. To provide the HR what they need. End of the day, the client's still gonna have to be involved. Um, you know, two recent examples, you know, again, we, we have 480 business clients and, you know, maybe a thousand individuals.

Jason · 26:18So if you go one and a half thousand. Potential client audits. We've had two in the last six months, so the numbers are, are, are very low from an actual audit percentage. It's not to tell people not to get audit insurance, but the one one did have audit insurance was a couple of grand worth of our time to go back and forward.

Jason · 26:35Global transactions, a little bit of a complicated, like, you know, a TO just checking some stuff, all good flying colors. But by the time we went back and forward, you know, our cost to the insurance company was a couple of grand. The, the insurance might have cost 400 bucks. Instead of paying us three to $4,000 to do the audit work, the insurance company paid that.

Jason · 26:54So that insurance policy paid for itself for 10 years. Essentially. On the other side, we had a, a smaller client, um, who really shouldn't have been an audit target. His, all his fees for managing this audit with the HEO might be up to about $7,000, no insurance.

Marty · 27:09Wow.

Jason · 27:11And, and it's, it's complex in a sense. He wanted us involved to make sure that we got this right.

Jason · 27:15He, you know, he potentially could have done it himself, but the h the a TO agent has been pretty hard on him. So having us as the middleman has kind of softened it a bit. Um, so yes, audit insurance, I mean, realistically think about the type of business you're in or the type of individual taxpayer you are.

Jason · 27:31And if there is some complexity to your, your affairs, then, you know, for an individual, you know, the, the audit insurance might be a hundred bucks. Um. Peace of mind tax deductible.

Marty · 27:40Do you see audits escalating based on this technology that's come through? Do you think more will go to audit because of, of what's going on?

Marty · 27:48Oh, mate,

Jason · 27:48we, we are only at the beginning. Mm. Like we on, honestly, like the fact that at the moment we're still getting notices from 2023 when the data points were a fraction of what they are today, I'm. I ask this question at episode 300 or episode 400, I think, I think that'll be a very d like I'll be telling you mate, we are getting letters daily of stuff that clients have said versus what the a TO knew I'm, it's gonna be a really And how much

Marty · 28:15is the audit insurance roughly?

Marty · 28:16Is a hundred bucks. 400 bucks?

Jason · 28:18Yeah. It's, it's from an individual point of view, yeah, it could be around a hundred bucks from a bigger business group, you might pay a thousand if you've got multiple entities, family trust, bucket companies, um, but usually in the middle as well. 3, 4, 500 bucks. It's all individually.

Jason · 28:31We can send links, um, not an audit, audit, insurance plug, but it is available. And look, that's actually probably one that a lot of small business owners and individual taxpayers don't know that they can buy audit insurance to cover them.

Marty · 28:42Do do you provide that Chase at future? Could you Sure do. Yeah. Okay.

Marty · 28:46I, I'm just thinking in regards to, this is obviously heading in a direction where there's gonna be. More of this just happening just because of what is happening in, in the tech, uh, until it rectifies itself. But it's probably a, yeah, it, it, it's probably a small investment given, like you said, that seven grand, eight grand cost, um, is quite significant not to men, not to mention the stress involved, uh, for a person as well.

Marty · 29:10So you go Yeah. You start to weigh things up like that.

Jason · 29:13Yeah. And that one's been horrible. Like, I, I honestly like really feel for this circumstance. It's just, and it's, I hate it because from the a TO side. They're not gonna get much like in a, it might be a $3,000 win back the A T's way, but I think about the cost of that employee salary, the cost of my team's salary, the cost of stress and bullshit that our client's gone through for the a TO get a $3,000 win back their way, like.

Jason · 29:37It, it's, it's not economical and it doesn't make sense. And if anything, you know, potentially this is one where, to the, to the ombudsman for, for the tax commissioner and uh, the HEO, there could be some escalating, some complaints here for, for what actually is viable and makes sense. But, you know, this, uh, sharing this with you guys, uh, wasn't necessarily about fear Moning.

Jason · 29:56It was an understanding of there is a lot of data, there is a lot of things that are going on and we're in a only at the beginning of this world of, uh, data matching and, and a TO compliance. So yeah, I just think it's one where education's important. Asking, talking to your accountant, getting it right and asking the right questions.

Jason · 30:11Um, but the digital footprint continues to grow and expand. And if you start to think about where we are now and where we'll be in five years and what the a TO and the government are trying to achieve from a big brother and watching point of view, it's only the beginning.

Nick · 30:23Doesn't it really back up our, um, previous conversations around the complexities of the tax system and like, why don't you just.

Nick · 30:35Have a, a flat tax rate. I get why that doesn't work. Even if you had a tiered tax rate, you know, someone on earning 50 grand a year pays five grand and maybe it's tiered from there. And just get rid of all the deductions, just lower the tax rates and get rid of the deductions.

Jason · 30:51The, the nick, you know, we've talked about it.

Jason · 30:53Tax reform in Australia just has happened for, for such a long time. Yeah, massive. Um, there is finally, there is finally some ongoing conversations about increasing GST to reduce income tax. I seeing a lot of that ever since, you know, brought, uh, we, we, we did an episode on it and it's, uh, the government have finally listened to the numbers.

Jason · 31:11Game episode. We can see the data in the background. Thank you for listening. Uh, a TO and Aussie government. But maybe, yeah, start to, uh, make some change that'll be positively impactful on, on everyday Australians. Um, but you know, I think, you know, you look at other established economies around the world, like in, in the uk a an employee who does their job.

Jason · 31:30It doesn't get to the end of the year. And then try and lodge a claim for their mobile phone, their internet, their home office, their car, um, their office expenses, uh, their boots. It's, it's ridiculous. You don't claim that. You just, you, you do your job and if you need to have something, you know, your employer might provide it or they don't.

Jason · 31:47And that's it. And, and the money that gets in your pocket every week is the money in your pocket. So if you eliminated. Millions of tax returns outta the Australian, you know, day to day for all of the basic tax returns were eliminated. Rather than letting Aussie self-assessment system and Aussie a pretty um.

Jason · 32:06I'd say aggressive in a sense when it comes to tax time, people love a refund and you know, it's a game. It's almost gamified. Mm. Especially the ones that do it themselves. You know, you jump into some online tax forum and so it's like, oh, my accountant said I was only getting a two grand refund, so I did it myself and I got five grand fucking go.

Jason · 32:21Me like it exists out there. Yes. One day the HEO will catch up and I don't condone that behavior. But like what you said, Nick, if we just remove that all together from the system mm-hmm. And people got more money in their pocket 'cause they paid less tax legally, and that was it.

Marty · 32:37Yeah, much better world.

Marty · 32:38Maybe we could, uh, bring it to a forum. 'cause again, you don't wanna bring in technology to make things more complicated. Uh, you, you need, you need it to be simplified to a point where it actually works effectively for all parties. And I'm, I'm a big fan of that, and everyone will win. So, yeah,

Jason · 32:53Howard, we'd love to know you, uh, hear your a TO pre-fill war stories or any data that the A TO has that you weren't expecting.

Jason · 32:59Feel free to comment on our YouTube. Um, send us the different links or contact, uh, Nick, Marty and I on LinkedIn where we're pretty active over there. Um, love having you listening. Make sure you rate, review and subscribe and until next time.

Marty · 33:12Oh, well, I just think, uh, Nick, myself and Jason just gonna shut down our OnlyFans page after this episode.

Marty · 33:18So, uh, yeah, if you, yeah, give us a final wave if you see us. Game over.

Jason · 33:24This podcast is for educational and informational purposes only. The conversations are of general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional.

Jason · 33:36Individuals on the podcast may hold positions in the company's discussed. ---