ANAO Report 2007-2008 30

The Auditor-General
Audit Report No.30 2007–08

Performance Audit
The Australian Taxation Office’s Use of Data

Matching and Analytics in Tax Administration
Australian Taxation Office
Australian National Audit Office

© Commonwealth
of Australia 2008
ISSN 1036–7632
ISBN 0 642 81011 7
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ANAO Audit Report No.30 2007–08

The Australian Taxation Office’s Use of Data Matching and Analytics in Tax Administration
2
Canberra ACT
24 April 2008
Dear Mr President
Dear Mr Speaker
The Australian National Audit Office has undertaken a performance audit in the
Australian Taxation Office in accordance with the authority contained in the
Auditor-General Act 1997. Pursuant to Senate Standing Order 166 relating to
the presentation of documents when the Senate is not sitting, I present the
report of this audit and the accompanying brochure. The report is titled The
Australian Taxation Office’s Use of Data Matching and Analytics in Tax
Administration.
Following its presentation and receipt, the report will be placed on the
Australian National Audit Office’s Homepage—http://www.anao.gov.au.
Yours sincerely
Ian McPhee
Auditor-General
The Honourable the President of the Senate

The Honourable the Speaker of the House of Representatives
Parliament House
Canberra ACT

3
AUDITING FOR AUSTRALIA
The Auditor-General is head of the

Australian National Audit Office. The
ANAO assists the Auditor-General to
carry out his duties under the
Auditor-General Act 1997 to undertake
performance audits and financial
statement audits of Commonwealth
public sector bodies and to provide
independent reports and advice for
the Parliament, the Government and
the community. The aim is to improve
Commonwealth public sector
administration and accountability.
For further information contact:

The Publications Manager
Australian National Audit Office
GPO Box 707
Canberra ACT 2601
Telephone: (02) 6203 7505

Fax: (02) 6203 7519
Email: webmaster@anao.gov.au
ANAO audit reports and information

about the ANAO are available at our
internet address:
http://www.anao.gov.au
Audit Team
David Crossley
Richard Mackey
Kirsty Stuart
Budi Cahyono

4
Contents
Abbreviations.................................................................................................................. 8
Summary and Recommendations ............................................................................ 11
Summary ...................................................................................................................... 13
Introduction ............................................................................................................. 13
Audit objective and scope ....................................................................................... 16
Conclusion .............................................................................................................. 17
Key findings by chapter........................................................................................... 20
Recommendations .................................................................................................. 26
Summary of agency response ................................................................................ 27
Recommendations ....................................................................................................... 28
Audit Findings and Conclusions .............................................................................. 31
1. Background and Context ........................................................................................ 33
The Australian Taxation Office................................................................................ 33
Data matching ......................................................................................................... 33
Data matching in the Tax Office.............................................................................. 34
Recent developments ............................................................................................. 39
Audit overview......................................................................................................... 46
2. Legislative and Policy Framework .......................................................................... 50
Authority for data matching ..................................................................................... 50
Compliance with privacy requirements ................................................................... 52
3. Data matching and analytics capability in the Tax Office ....................................... 57
Introduction ............................................................................................................. 57
A Tax Office capability ............................................................................................ 57
Data matching and analytics: administrative framework......................................... 61
Data matching and analytics: methodologies ......................................................... 63
Data acquisition and quality .................................................................................... 79
Pre-filling income tax returns .................................................................................. 82
Optimising the potential of data matching and analytics......................................... 86
4. Governance and Coordination Arrangements ........................................................ 94
Introduction ............................................................................................................. 94
Management of the data matching and analytics capability ................................... 94
Performance monitoring and reporting ................................................................... 96
Guidance to Tax Office staff ................................................................................. 105
Emerging issues.................................................................................................... 106

5
Appendices ............................................................................................................... 109
Appendix 1: Agency Response ............................................................................ 111
Appendix 2: Authority for acquisition of data ........................................................ 114
Provided data ........................................................................................................ 114
Legislated data...................................................................................................... 118
Memorandum of understanding data .................................................................... 121
Purchased data ..................................................................................................... 121
Datasets the Tax Office requisitioned on an ad hoc basis for data matching
projects............................................................................................................. 122
Appendix 3: Tax Office’s data mining, modelling, mapping and analytics
projects ............................................................................................. 133
Glossary ..................................................................................................................... 137
Index........................................................................................................................... 143
Series Titles................................................................................................................ 145
Current Better Practice Guides .................................................................................. 148
Tables
Table 1 Tax Office submissions to the Privacy Commissioner, 2003–04
to 2006–07.......................................................................................... 21
Table 2 Automated data matching using Annual Investment Income
Report (AIIR) and Dividend and Interest Schedule data, Pay-As-
You-Go (PAYG) data (e.g. salary, lump sums, fringe benefits),
Centrelink data (e.g. various benefits and allowances, pensions),
and Medicare Australia data (e.g. private health insurance
premiums, Medicare levy surcharge data) ......................................... 25
Table 2.1 Tax Office submissions to the Privacy Commissioner, 2003–04
to 2006–07.......................................................................................... 53
Table 3.1 Automated data matching using legislated data sources................... 71
Table 3.2 Data matching using data on foreign sourced income ....................... 72
Table 3.3 Administrative matching of purchased data to update client
registers .............................................................................................. 76
Table 3.4 Data matching projects using requisitioned data ............................... 77
Table 4.1 Results of the legal profession project ............................................... 98
Table A 1 (a) Data provided to the Tax Office by taxpayers or their tax agents .... 114
Table A 1 (b) Supplementary data provided to the Tax Office by taxpayers or
their tax agents ................................................................................. 115
Table A 2 Legislated datasets the Tax Office receives regularly, and the
legislation under which the data is provided..................................... 118
Table A 3 Datasets acquired through a memorandum of understanding ......... 121
Table A 4 Datasets the Tax Office purchases .................................................. 121
Table A 5 Tax Office’s gazetted data matching projects 2000–07 ................... 122
Table A 6 Analytics projects 2005 to 2007 ....................................................... 134
6
Figures
Figure 1.1 Categories of data .............................................................................. 36
Figure 2.1 Tax Office and federal government agency submissions to the
Privacy Commissioner, 2003–04 to 2006–07..................................... 55
Figure 3.1 Tax Office’s compliance model .......................................................... 62
Figure 3.2 Tax Office data matching and analytics capability ............................. 65
Figure 4.1 Lodgement of lawyers income tax returns.......................................... 99
Figure 4.2 Legal Profession voluntary compliance in debt and lodgement of
income tax returns. ........................................................................... 100

7
Abbreviations
ABNȱ AustralianȱBusinessȱNumberȱ
AIIRȱ AnnualȱInvestmentȱIncomeȱReportsȱ
AML/CTFȱ AntiȬMoneyȱLaunderingȱandȱCounterȬTerrorismȱFinancingȱ
ANAOȱ AustralianȱNationalȱAuditȱOfficeȱ
ASICȱ AustralianȱSecuritiesȱandȱInvestmentsȱCommissionȱ
ATOmsȱ AustralianȱTaxationȱOfficeȱmatchingȱsystemȱ
ATROȱ AustralianȱTaxationȱandȱRevenueȱOfficesȱ
AUSTRACȱ AustralianȱTransactionȱReportsȱandȱAnalysisȱCentreȱ
CGTȱ CapitalȱGainsȱTaxȱ
CKOȱ ChiefȱKnowledgeȱOfficerȱ
COAGȱ CouncilȱofȱAustralianȱGovernmentsȱ
DMSCȱ DataȱMatchingȱSteeringȱCommitteeȱ
ECIȱ ElectronicȱCommerceȱInterfaceȱ
ECMPȱ Easier,ȱCheaperȱandȱMoreȱPersonalisedȱ
EDWȱ EnterpriseȱDataȱWarehouseȱ
GSTȱ GoodsȱandȱServicesȱTaxȱ
HECS/SFSSȱ Higherȱ Educationȱ Contributionȱ Scheme/Studentȱ Financialȱ

SupplementȱSchemeȱ
HOTSAȱ HealthȱofȱtheȱSystemȱAssessmentȱ
ICPȱ IntegratedȱCoreȱProcessingȱ

8
ITAAȱ IncomeȱTaxȱAssessmentȱActȱ
ME&Iȱ MicroȱEnterprisesȱandȱIndividualsȱ
OCKOȱ OfficeȱofȱtheȱChiefȱKnowledgeȱOfficerȱ
OECDȱ OrganisationȱforȱEconomicȱCoȬoperationȱandȱDevelopmentȱ
PAYGȱ PayȱAsȱYouȱGoȱ
RFTȱ RequestȱforȱTenderȱ
TaxȱOfficeȱ AustralianȱTaxationȱOfficeȱ
TFNȱ TaxȱFileȱNumberȱ
ȱ
ȱ

9
10
Summary and
Recommendations

11
12
Summary
Introduction
1. Inȱ 2006–07ȱ theȱ Australianȱ Taxationȱ Office’sȱ (Taxȱ Office)ȱ revenueȱ fromȱ
incomeȱ tax,ȱ indirectȱ tax,ȱ otherȱ taxesȱ andȱ exciseȱ totalledȱ someȱ $254.8ȱ billion. 1 ȱ
Australia’sȱ taxationȱ systemȱ ofȱ selfȱ assessmentȱ placesȱ responsibilityȱ onȱ
taxpayersȱ toȱ declareȱ allȱ ofȱ theirȱ assessableȱ incomeȱ andȱ claimȱ onlyȱ deductionsȱ
and/orȱoffsetsȱtoȱwhichȱtheyȱareȱentitled.ȱInȱadministeringȱtheȱtaxationȱsystem,ȱ
theȱTaxȱOfficeȱhasȱtoȱbalanceȱtheȱunderlyingȱprinciplesȱofȱselfȱassessmentȱwithȱ
theȱneedȱtoȱmanageȱrisks,ȱsuchȱasȱlackȱofȱcomplianceȱwithȱlegislation,ȱfailingsȱ
inȱ theȱ integrityȱ ofȱ theȱ taxȱ system,ȱ damageȱ toȱ theȱ Taxȱ Office’sȱ reputation,ȱ andȱ
erosionȱofȱtheȱCommonwealth’sȱrevenueȱbase,ȱasȱefficientlyȱandȱasȱeffectivelyȱ
asȱpossible.ȱȱ
2. InȱaȱselfȬassessmentȱsystemȱtheȱTaxȱOfficeȱseeksȱtoȱachieveȱhighȱlevelsȱ
ofȱ complianceȱ byȱ usingȱ theȱ Complianceȱ Model 2 ȱ ofȱ behaviourȱ toȱ guideȱ theȱ
applicationȱ ofȱ riskȱ mitigationȱ strategies.ȱ Theseȱ strategiesȱ rangeȱ fromȱ theȱ
communicationȱ ofȱ informationȱ toȱ helpȱ taxpayersȱ fulfilȱ theirȱ obligationsȱ toȱ
criminalȱprosecutionȱtoȱstopȱandȱdeterȱegregiousȱnonȬcompliance.ȱInȱtermsȱofȱ
resourceȱinvestments,ȱauditsȱhaveȱtraditionallyȱconstitutedȱtheȱprimaryȱformȱofȱ
verificationȱ adoptedȱ byȱ revenueȱ bodies,ȱ includingȱ theȱ Taxȱ Office,ȱ toȱ checkȱ
taxpayers’ȱ complianceȱ withȱ theirȱ obligations.ȱ However,ȱ thereȱ areȱ practicalȱ
limitationsȱ regardingȱ theȱ levelȱ ofȱ taxpayerȱ andȱ incomeȱ coverageȱ achievableȱ
fromȱauditȱactivities.ȱȱ
3. Sinceȱ theȱ 1970sȱ theȱ Taxȱ Officeȱ hasȱ beenȱ developingȱ aȱ computerȬbasedȱ
dataȱ matchingȱ capabilityȱ whichȱ isȱ deployedȱ toȱ assistȱ theȱ mitigationȱ ofȱ risksȱ
associatedȱ withȱ theȱ managementȱ ofȱ taxpayerȱ compliance.ȱ Traditionalȱ
semiȬautomatedȱdataȱmatchingȱvalidatesȱtheȱincomeȱreportedȱbyȱtaxpayersȱinȱ
theirȱreturnsȱandȱdisclosesȱincomeȱthatȱhadȱnotȱbeenȱreportedȱtoȱtheȱTaxȱOffice.ȱ
Inȱmanyȱcasesȱitȱgeneratesȱautomaticȱcorrespondenceȱtoȱtaxpayers.ȱȱ
1
Australian Taxation Office, Annual Report 2006–07, p. 283.
2
The Compliance Model (see Fig 3.1 of this Report) summarises a considerable body of knowledge about
the reasons why people function the way they do in relation to society’s institutional arrangements. The
Model shows the most cost-effective compliance strategy that the Tax Office should adopt for a particular
group of taxpayers. The Model provides a knowledge-based framework for determining the most
appropriate strategy to take in relation to a compliance problem, given what is known about taxpayers,
their situation, circumstances, and lines of business. The Model was first presented in 1998 in the
Second Report of the Cash Economy Task Force, Improving Tax Compliance in the Cash Economy;
ATO April 1998.

13
4. Moreȱ recently,ȱ theȱ Taxȱ Officeȱ hasȱ augmentedȱ traditional,ȱ semiȬ
automatedȱ dataȱ matchingȱ withȱ projectȬbasedȱ dataȱ matchingȱ andȱ analytics 3 ȱ
projects.ȱ Theȱ moreȱ focussedȱ dataȱ matchingȱ projectsȱ areȱ framedȱ aroundȱ
categoriesȱ ofȱ complianceȱ riskȱ andȱ involveȱ significantȱ investigationsȱ byȱ
specialistȱ taxȱ officers.ȱ Mostȱ ofȱ theȱ projectsȱ haveȱ aȱ largeȱ researchȱ andȱ
developmentȱ component.ȱ Theȱ analyticsȱ projectsȱ generallyȱ useȱ advancedȱ
statisticalȱ and/orȱ mathematicalȱ toolsȱ toȱ examineȱ aȱ wideȱ rangeȱ ofȱ complianceȱ
risks.ȱ Onceȱ establishedȱ afterȱ testing,ȱ someȱ ofȱ theȱ analyticsȱ projectsȱ involveȱ
semiȬautomatedȱ processes,ȱ whichȱ resultȱ inȱ administrativeȱ actionȱ notȱ unlikeȱ
traditionalȱsemiȬautomatedȱdataȱmatching.ȱȱ
5. AsȱtheȱTaxȱOfficeȱgainsȱmoreȱexperienceȱofȱtheȱsuccessesȱandȱchallengesȱ
ofȱ theseȱ projectsȱ itȱ isȱ improvingȱ anȱ evolvingȱ genericȱ capability.ȱ Theȱ ANAOȱ
reviewedȱ 80ȱ dataȱ matchingȱ andȱ analyticsȱ projectsȱ allȱ ofȱ whichȱ indicateȱ theȱ
scopeȱ andȱ potentialȱ ofȱ thisȱ genericȱ capability.ȱ Inȱ particular,ȱ itȱ enablesȱ theȱ
bringingȱ togetherȱ andȱ interrogationȱ ofȱ largeȱ volumesȱ ofȱ dataȱ fromȱ differentȱ
sources.ȱ Theȱ capabilityȱ hasȱ facilitatedȱ anȱ increasedȱ capacityȱ toȱ makeȱ
comparisons,ȱ linkȱ dataȱ sets,ȱ compareȱ correspondingȱ items,ȱ findȱ relationshipsȱ
andȱpatternsȱandȱconstructȱdescriptiveȱorȱhypotheticalȱrepresentationalȱand/orȱ
functionalȱ relationshipsȱ amongstȱ theȱ dataȱ variablesȱ relevantȱ toȱ theȱ
managementȱofȱcomplianceȱrisks.ȱȱ
6. Inȱsummary,ȱtheȱTaxȱOfficeȱhasȱexpandedȱitsȱrangeȱofȱcomputerȬbasedȱ
strategiesȱ toȱ supportȱ theȱ managementȱ ofȱ complianceȱ risks.ȱ Theseȱ nowȱ rangeȱ
fromȱ traditionalȱ semiȬautomatedȱ dataȱ matchingȱ toȱ advancedȱ analyticsȱ whichȱ
createȱ sophisticatedȱ mathematicalȱ modelsȱ ofȱ varietiesȱ ofȱ seriousȱ nonȬ
compliance.ȱ
7. Withinȱ thisȱ expandingȱ framework,ȱ theȱ Taxȱ Officeȱ definesȱ traditionalȱ
dataȱmatchingȱasȱ‘theȱacquisitionȱofȱexternalȱdataȱusedȱbyȱtheȱTaxȱOfficeȱforȱaȱvarietyȱ
3
In this Report ‘analytics’ is a technical term with a precise meaning. ‘Analytics’ means a discipline that
identifies patterns, relationships and trends from data, using a variety of mathematically based
technologies principally drawn from statistics and data mining. Most broadly, analytics covers what might
be called basic analytics, including data exploration and aggregation, and advanced analytics, which
uses data mining technology for discovery and model building purposes. Using statistical and data
mining technologies, significantly more complex relationships within and between entities (e.g.
taxpayers) can be discovered and modelled, based on analyses over very large populations of collected
data. Analytics is assisted by the use of good data matching and data linking techniques which improve
the quality and value of data inputs available to a data miner. Conversely, analytics can also provide
technology to assist data matching and data linking activities. See further the Glossary at the end of this
Report.

14
Summary
ofȱ differentȱ purposesȱ suchȱ asȱ detectionȱ ofȱ unȬdisclosedȱ income,ȱ nonȬlodgementȱ ofȱ
returnsȱandȱactivityȱstatements,ȱandȱentitiesȱoutsideȱtheȱtaxȱsystem.’ 4ȱ
8. TheȱTaxȱOfficeȱundertakesȱtwoȱcategoriesȱofȱdataȱmatching:ȱ
x largeȱ scaleȱ postȬissueȱ semiȬautomatedȱ systemȱ processingȱ (e.g.ȱ theȱ Taxȱ
Office’sȱ automatedȱ Australianȱ Taxationȱ Officeȱ matchingȱ systemȱ
(ATOms)ȱautomaticallyȱmatchesȱdata,ȱincludingȱlegislatedȱdata 5 ȱagainstȱ
dataȱtaxpayersȱprovideȱdirectlyȱtoȱtheȱTaxȱOffice,ȱdetectsȱdiscrepanciesȱ
inȱ statedȱ income,ȱ andȱ producesȱ aȱ poolȱ ofȱ discrepantȱ casesȱ forȱ
complianceȱactivity); 6 ȱandȱ
x dataȱmatchingȱprojectsȱ(e.g.ȱbusinessȱlines 7 ȱinitiateȱprojectsȱthatȱinvolveȱ
acquiringȱ andȱ matchingȱ externalȱ dataȱ toȱ internalȱ Taxȱ Officeȱ databasesȱ
andȱ producingȱ aȱ poolȱ ofȱ casesȱ forȱ riskȱ identificationȱ orȱ complianceȱ
activity.ȱ Seeȱ Appendixȱ 2,ȱ Tableȱ A5ȱ forȱ aȱ listȱ ofȱ theȱ Taxȱ Office’sȱ dataȱ
matchingȱprojectsȱsinceȱ2000).ȱȱ
9. Theȱtwoȱcategoriesȱofȱdataȱmatchingȱareȱadministeredȱbyȱdifferentȱareasȱ
ofȱ theȱ Taxȱ Office.ȱ Theȱ Microȱ Enterprisesȱ andȱ Individualsȱ businessȱ lineȱ isȱ
responsibleȱ forȱ dataȱ matchingȱ inȱ theȱ firstȱ category.ȱ However,ȱ theȱ Dataȱ
MatchingȱSteeringȱCommitteeȱ(DMSC)ȱcoordinatesȱandȱfacilitatesȱtheȱinitiationȱ
andȱconductȱofȱtheȱdataȱmatchingȱprojectsȱinȱtheȱsecondȱcategory.ȱ
10. Thereȱ areȱ similarlyȱ twoȱ broadȱ categoriesȱ ofȱ analyticsȱ projects.ȱ
Advancedȱanalyticsȱprojects,ȱlargelyȱbasedȱonȱdataȱminingȱandȱmodelling,ȱareȱ
administeredȱ byȱ theȱ analyticȱ groupȱ inȱ theȱ Officeȱ ofȱ theȱ Chiefȱ Knowledgeȱ
Officer.ȱBasicȱanalyticsȱprojects,ȱusingȱmoreȱconventionalȱtools,ȱareȱdistributedȱ
broadlyȱacrossȱ mostȱ TaxȱOfficeȱbusinessȱ lines.ȱGenerically,ȱ analyticsȱ activitiesȱ
involveȱ discoveringȱ relationships,ȱ patternsȱ andȱ trendsȱ inȱ datasets,ȱ building,ȱ
4
Tax Office, External Data Matching PS CM 2004/17.
5
Legislated data refers to data third parties provide to the Tax Office, as a result of specific legislated
requirements (e.g. Annual Investment Income Reports (AIIR) provided by financial institutions see Audit
Report No.48 2003–04, The Australian Taxation Office’s Management and Use of Annual Investment
Income Reports). Legislated data sets cover major income streams such as salary and wages and
interest and dividends, but do not cover other income streams such as capital gains, net rents, and
income from self employment. See Appendix 2, Table A2 for a list of legislated datasets the Tax Office
regularly receives, and the legislation under which the data is provided.
6
The investigation of discrepant cases, which is critical to the effectiveness of ATOms relies on an
investigatory effort in a way that is similar to some analytics projects. See Audit Report No.48 2003–04,
The Australian Taxation Office’s Management and Use of Annual Investment Income Reports,
Chapter 5.
7
Business lines are the market segment compliance divisions and include Large Business and
International, Small Business Enterprises, Micro Enterprises and Individuals, Superannuation, Serious
Non Compliance, Debt, Goods and Services Tax and Excise.

15
testingȱ andȱ operatingȱ dataȱ modelsȱ usingȱ dataȱ providedȱ directlyȱ toȱ theȱ Taxȱ
Office,ȱ internallyȱ generatedȱ dataȱ (suchȱ asȱ theȱ resultsȱ ofȱ complianceȱ activities)ȱ
andȱ externallyȱ sourcedȱ datasets.ȱ (Seeȱ Glossaryȱ forȱ definitionsȱ ofȱ advancedȱ
analytics,ȱbasicȱanalytics,ȱdataȱmodelling,ȱandȱdataȱmining).ȱȱ
11. Traditionally,ȱ Taxȱ Officeȱ dataȱ matchingȱ hasȱ hadȱ aȱ complianceȱ focus,ȱ
withȱexternalȱdataȱbeingȱusedȱforȱcomplianceȱverificationȱpurposes.ȱHowever,ȱ
theȱ Taxȱ Officeȱ hasȱ alsoȱ recentlyȱ begunȱ toȱ addressȱ inȱ aȱ substantialȱ wayȱ theȱ
potentialȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ toȱ supportȱ taxpayerȱ serviceȱ needsȱ
(andȱ toȱ reduceȱ taxpayers’ȱ complianceȱ burden,ȱ perhapsȱ significantly).ȱ Theȱ
spreadȱ andȱ powerȱ ofȱ ITȱ systemsȱ usedȱ byȱ businessȱ andȱ Government,ȱ inȱ
conjunctionȱ withȱ moreȱ secureȱ facilitiesȱ onȱ theȱ Worldȱ Wideȱ Web,ȱ providesȱ
significantlyȱ increasedȱ capacityȱ forȱ timelyȱ electronicȱ exchangesȱ ofȱ dataȱ andȱ
opportunitiesȱforȱnewȱandȱimprovedȱservicesȱtoȱtaxȱpayers.ȱThisȱexpandingȱuseȱ
ofȱ highȱ qualityȱ data,ȱespeciallyȱ forȱ theȱ provisionȱ ofȱ webȬbasedȱ servicesȱ atȱ theȱ
timeȱ taxpayersȱ completeȱ theirȱ taxȱ returns,ȱ representsȱ aȱ newȱ paradigmȱ inȱ taxȱ
administration.ȱȱ
Audit objective and scope

12. Theȱ objectiveȱ ofȱ theȱ auditȱ wasȱ toȱ evaluateȱ theȱ Taxȱ Officeȇsȱ corporateȱ
managementȱofȱdataȱmatching,ȱincludingȱanalytics.ȱȱ
13. Theȱ ANAOȱ examinedȱ theȱ Taxȱ Office’sȱ strategicȱ goalsȱ andȱ governanceȱ
arrangementsȱ forȱ dataȱ matchingȱ andȱ analytics,ȱ itsȱ complianceȱ withȱ privacyȱ
requirementsȱandȱwhetherȱtheȱTaxȱOfficeȱisȱachievingȱintendedȱresults,ȱwhichȱ
includeȱ revenueȱ collection,ȱ optimisedȱ complianceȱ andȱ provisionȱ ofȱ improvedȱ
servicesȱtoȱtaxpayers.ȱ
14. Taxȱ Officeȱ executivesȱ haveȱ beenȱ increasinglyȱ drawingȱ onȱ theȱ
interrelationshipsȱ andȱ conceptualȱ commonalitiesȱ ofȱ Taxȱ Officeȱ dataȱ matchingȱ
andȱanalyticsȱactivity. 8 ȱAccordingly,ȱtheȱauditȱincludedȱtheseȱrelationshipsȱandȱ
conceptualȱcommonalitiesȱwithinȱtheȱscopeȱofȱtheȱaudit.ȱTheȱauditȱwasȱguided,ȱ
8
For example, “As our Integrated Core Processing matures, we will be able to develop more refined risk
models with wider data warehousing, analytics, and data mining and matching capabilities. These
capabilities will mean that we will be able to better differentiate between those taxpayers who are trying
to do the right thing and those that are not; and by integrating data matching work with our risk profiling
we are making sure that they are working hand-in-glove. This work happens without the Tax Office
contacting people and wasting their time.” And “In the future we will be developing more sophisticated
multi-factor data matching, not just using, for example, TFN or name matches. We will match
simultaneously across multiple data sources and more attributes, such as birth date and address. This
wider range of factors will provide progressively higher degrees of reliability.” Michael D’Ascenzo,
Commissioner of Taxation, Simplifying Tax Administration in a Complex World: The Challenge of Infinite
Variety, Australian Tax Teachers’ Association Conference, University of Queensland 22–24 January
2007.

16
Summary
therefore,ȱ byȱ aȱ broaderȱ definitionȱ ofȱ ‘dataȱ matching’:ȱ meaningȱ ‘findingȱ

relationshipsȱ andȱ patternsȱ inȱ largeȱ volumesȱ ofȱ data’.ȱ Thisȱ includesȱ theȱ moreȱ
traditionalȱ ideaȱ ofȱ dataȱ matchingȱ asȱ ‘bringingȱ togetherȱ dataȱ fromȱ differentȱ
sourcesȱandȱcomparingȱit’.ȱȱ
15. Atȱ theȱ conceptualȱ levelȱ ofȱ thisȱ broaderȱ definition,ȱ traditionalȱ semiȬ
automatedȱ Taxȱ Officeȱ dataȱ matchingȱ isȱ increasinglyȱ becomingȱ anȱ integratedȱ
elementȱ withinȱ Taxȱ Office’sȱ moreȱ recentlyȱ initiatedȱ analyticsȱ work.ȱ
Accordingly,ȱinȱthisȱreport,ȱtheȱphraseȱ‘dataȱmatchingȱandȱanalyticsȱcapability’ȱ
includesȱ allȱ theȱ computerȬbasedȱ methodologiesȱ thatȱ theȱ Taxȱ Officeȱ appliesȱ toȱ
bringȱ togetherȱ largeȱ volumesȱ ofȱ dataȱ fromȱ differentȱ sources,ȱ makingȱ
comparisons,ȱ linkingȱ dataȱ sets,ȱ comparingȱ correspondingȱ items,ȱ findingȱ
relationshipsȱ andȱ patternsȱ andȱ constructingȱ descriptiveȱ orȱ hypotheticalȱ
representationalȱand/orȱfunctionalȱrelationships.ȱȱ
16. Theȱ auditȱ focussedȱ onȱ theȱ conductȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ
projectsȱ byȱ Taxȱ Officeȱ businessȱ lines,ȱ theȱ significantȱ synergiesȱ andȱ
interrelationshipsȱ betweenȱ theseȱ projectsȱ andȱ otherȱ Taxȱ Officeȱ activities,ȱ suchȱ
asȱ identityȱ matching,ȱ Australianȱ Taxationȱ Officeȱ matchingȱ systemȱ (ATOms)ȱ
andȱanalyticsȱprojects.ȱȱ
Conclusion
17. Theȱ Taxȱ Officeȱ isȱ makingȱ useȱ ofȱ itsȱ dataȱ matchingȱ andȱ analyticalȱ
capabilitiesȱinȱaȱmoreȱcorporateȱandȱstrategicȱway.ȱThisȱhasȱcontributedȱtoȱtheȱ
Taxȱ Officeȱ reportingȱ improvedȱ compliance,ȱ betterȱ servicesȱ andȱ theȱ moreȱ
efficientȱ andȱ effectiveȱ useȱ ofȱ resources.ȱ Itȱ hasȱ alsoȱ enabledȱ theȱ Taxȱ Officeȱ toȱ
betterȱunderstandȱrisks.ȱProceduralȱarrangementsȱhaveȱenabledȱtheȱTaxȱOfficeȱ
toȱ improveȱ theȱ useȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ andȱ complyȱ withȱ Privacyȱ
Commissionerȱ Guidelines.ȱ Contactȱ withȱ aȱ numberȱ ofȱ nationalȱ revenueȱ
authoritiesȱ ofȱ memberȱ statesȱ ofȱ theȱ Organisationȱ forȱ Economicȱ CoȬoperationȱ
andȱDevelopmentȱ(OECD)ȱsuggestȱthatȱtheȱTaxȱOfficeȱisȱwellȱregardedȱforȱitsȱ
workȱinȱtheȱdataȱmatchingȱandȱanalyticsȱfield.ȱȱ
18. Theȱ analyticsȱ groupȱ inȱ theȱ Officeȱ ofȱ theȱ Chiefȱ Knowledgeȱ Officerȱ hasȱ
madeȱaȱvaluableȱcontributionȱtoȱtaxȱadministrationȱduringȱtheȱthreeȱyearsȱsinceȱ
itsȱestablishment.ȱItȱhasȱpioneeredȱmanyȱnewȱsophisticatedȱmathematicalȱandȱ
statisticalȱ methodologiesȱ (seeȱ Glossary)ȱ resultingȱ inȱ improvedȱ compliance,ȱ
improvedȱservices,ȱandȱtheȱmoreȱefficientȱandȱeffectiveȱuseȱofȱresources.ȱȱ

17
19. Asȱ aȱ resultȱ ofȱ theseȱ achievementsȱ theȱ Taxȱ Officeȱ hasȱ developedȱ aȱ dataȱ
matchingȱ andȱ analyticsȱ capabilityȱ whichȱ encompassesȱ traditionalȱ dataȱ matchingȱ
andȱitsȱintegrationȱintoȱtheȱbroaderȱareaȱofȱanalytics.ȱȱ
20. Theȱ progressiveȱ implementationȱ ofȱ theȱ Easier,ȱ Cheaperȱ andȱ Moreȱ
PersonalisedȱChangeȱProgramȱ(ECMPȱChangeȱProgram)ȱnowȱunderȱwayȱprovidesȱ
theȱTaxȱOfficeȱwithȱtheȱopportunityȱtoȱgetȱmuchȱmoreȱfromȱtheȱcapabilityȱthanȱ
previouslyȱpossible.ȱTheȱECMPȱChangeȱProgramȱprovidesȱforȱtheȱfirstȱtime,ȱanȱ
administrativeȱ andȱ systemsȱ environmentȱ whichȱ willȱ enableȱ theȱ Taxȱ Officeȱ toȱ
betterȱ manageȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ strategicallyȱ andȱ
corporately.ȱȱ
21. AlthoughȱtraditionalȱsemiȬautomatedȱdataȬmatchingȱhasȱbeenȱaȱfeatureȱ
ofȱ taxȱ administrationȱ sinceȱ theȱ 1970s,ȱ theȱ Taxȱ Officeȱ hasȱ onlyȱ recentlyȱ
developedȱ theȱ moreȱ comprehensiveȱ dataȱ matchingȱ andȱ analyticsȱ capability.ȱ
Thereȱ isȱ scopeȱ toȱ improveȱ itsȱ corporateȱ andȱ strategicȱ managementȱ ofȱ thisȱ
emergingȱ capability.ȱ Theȱ developmentȱ ofȱ aȱ strategicȱ planȱ forȱ acquiringȱ andȱ
usingȱexternalȱdataȱoverȱaȱthreeȱtoȱfiveȱyearȱperiodȱwouldȱbeȱaȱkeyȱstepȱinȱthisȱ
direction.ȱȱ
22. Aȱ highȱ levelȱ stockȱ takeȱ ofȱ achievementsȱ andȱ lessonsȱ learnedȱ fromȱ theȱ
deploymentȱ ofȱ theȱ capabilityȱ wouldȱ alsoȱ informȱ theȱ identificationȱ ofȱ
opportunitiesȱforȱtheȱimprovedȱmanagementȱofȱtheȱcapabilityȱatȱtheȱcorporateȱ
andȱstrategicȱlevels.ȱȱ
23. Additionally,ȱ thereȱ isȱ scopeȱ toȱ improveȱ theȱ designȱ andȱ useȱ ofȱ theȱ Taxȱ
Office’sȱ identityȱ matchingȱ systemsȱ especiallyȱ inȱ twoȱ areas.ȱ Oneȱ concernsȱ
nonȬindividualȱidentityȱmatching,ȱparticularlyȱinȱrelationȱtoȱcompanies,ȱtrustsȱ
andȱ superannuationȱ funds.ȱ Theȱ otherȱ concernsȱ theȱ implementationȱ ofȱ aȱ
negativeȱsearch 9 ȱfacilityȱinȱrelationȱtoȱtheȱregistrationȱofȱindividualȱtaxȱpayersȱ
andȱtheȱadministrationȱofȱsuperannuation.ȱAȱnegativeȱsearchȱfacilityȱprovidesȱ
increasedȱ assuranceȱ thatȱ individualsȱ doȱ notȱ existȱ inȱ theȱ dataȱ sets,ȱ thusȱ
improvingȱtheȱintegrityȱofȱtheȱdata.ȱȱ
24. Theȱ Taxȱ Officeȱ isȱ movingȱ intoȱ anȱ environmentȱ whichȱ isȱ placingȱ aȱ
premiumȱ onȱ theȱ fullyȱ effectiveȱ useȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ
capability.ȱ Anȱ exampleȱ ofȱ thisȱ isȱ theȱ preȬfillingȱ initiative.ȱ Itȱ representsȱ aȱ
paradigmȱshiftȱforȱtheȱTaxȱOffice’sȱuseȱofȱdataȱmatchingȱandȱanalytics.ȱThisȱisȱ
becauseȱ itȱ isȱ pioneeringȱ aȱ shiftȱ fromȱ bulkȱ postȬassessmentȱ incomeȱ dataȱ
9
A negative search facility can match and report a ‘No Match’ as a success; that is, establish with a
specific level of confidence, that the individual does not exist in the data being searched.

18
Summary
matchingȱtoȱtheȱpreȬfillingȱofȱelectronicȱtaxȱreturnsȱwithȱdataȱthatȱwouldȱhaveȱ
beenȱusedȱinȱsemiȬautomatedȱpostȬassessmentȱdataȱmatching.ȱȱ
25. Theȱ longerȱ termȱ successȱ ofȱ preȬfillingȱ dependsȱ onȱ theȱ continuedȱ
assistanceȱ byȱ theȱ suppliersȱ ofȱ legislatedȱ data. 10 ȱ However,ȱ toȱ beȱ fullyȱ effectiveȱ
theȱ reportingȱ deadlinesȱ forȱ legislatedȱ dataȱ mayȱ haveȱ toȱ beȱ broughtȱ forward.ȱ
Also,ȱ theȱ Taxȱ Office’sȱ useȱ ofȱ thirdȱ partyȱ data,ȱ necessaryȱ forȱ improvedȱ
administrationȱ andȱ achievingȱ aȱ higherȱ integrityȱ taxȱ system,ȱ wouldȱ beȱ
improvedȱifȱlegislationȱenabledȱattachmentȱofȱtheȱTFNȱtoȱtheȱdataȱinȱaȱmannerȱ
similarȱtoȱtheȱarrangementsȱthatȱapplyȱtoȱlegislatedȱdata.ȱȱ
26. Theȱ legislativeȱ developmentȱ ofȱ theȱ TFNȱ reflectsȱ theȱ tensionȱ ofȱ
maintainingȱ anȱ appropriateȱ balanceȱ betweenȱ individualȱ privacyȱ andȱ
improvingȱtheȱefficiencyȱandȱeffectivenessȱofȱpublicȱadministration.ȱGivenȱthatȱ
theȱ determinationȱ ofȱ whereȱ theȱ balanceȱ ofȱ thisȱ tensionȱ liesȱ isȱ aȱ matterȱ forȱ theȱ
GovernmentȱandȱtheȱParliament,ȱtheȱANAOȱhasȱproposedȱthatȱtheȱTaxȱOfficeȱ
developȱoptionsȱforȱlegislativeȱamendmentȱforȱdiscussionȱwithȱtheȱTreasuryȱinȱ
theȱfirstȱinstance.ȱȱ
27. Inȱ lightȱ ofȱ theȱ Taxȱ Office’sȱ strongerȱ dataȱ matchingȱ andȱ analyticsȱ
capability,ȱ thereȱ isȱ scopeȱ forȱ itsȱ increasedȱ exploratoryȱ use.ȱ Thereȱ isȱ scopeȱ toȱ
moreȱ efficientlyȱ andȱ moreȱ quicklyȱ identifyȱ aȱ rangeȱ ofȱ complianceȱ risks,ȱ
includingȱthoseȱtoȱtheȱtaxȱsystem’sȱintegrityȱandȱtoȱtheȱrevenueȱbase,ȱtherebyȱ
improvingȱtheȱTaxȱOffice’sȱunderstandingȱofȱtheseȱrisks.ȱȱ
28. Mostȱ complianceȱ risksȱ inȱ respectȱ ofȱ theȱ majorityȱ ofȱ taxpayersȱ areȱ
addressed,ȱ inȱ lineȱ withȱ theȱ Complianceȱ Model,ȱ byȱ theȱ provisionȱ ofȱ servicesȱ
suchȱ asȱ education,ȱ assistance,ȱ information,ȱ andȱ makingȱ complianceȱ easier,ȱ
cheaperȱandȱmoreȱpersonalised.ȱComplianceȱrisksȱofȱtheȱmostȱegregiousȱtype,ȱ
whichȱareȱdepictedȱinȱtheȱComplianceȱ Modelȱasȱ beingȱ towardsȱ theȱ topȱ ofȱtheȱ
complianceȱ pyramidȱ (Figȱ 3.1),ȱ areȱ consideredȱ byȱ theȱ Taxȱ Officeȱ asȱ beingȱ bestȱ
addressedȱ byȱ personalised,ȱ swift,ȱ forcefulȱ and,ȱ ifȱ atȱ allȱ possible,ȱ preȬemptive,ȱ
action.ȱȱ
29. Theȱ implementationȱ ofȱ preȬfilling,ȱ otherȱ onȬline,ȱ webȬbasedȱ servicesȱ
andȱ theȱ ECMPȱ Changeȱ Program,ȱ providesȱ theȱ Taxȱ Officeȱ withȱ theȱ potentialȱ toȱ
10
Legislated data refers to data third parties provide to the Tax Office, as a result of specific legislated
requirements (e.g. Annual Investment Income Reports (AIIR) provided by financial institutions - see Audit
Report No.48 2003–04, The Australian Taxation Office’s Management and Use of Annual Investment
Income Reports). Legislated data sets cover major income streams such as salary and wages and
interest and dividends, but do not cover other income streams such as capital gains, net rents, and
income from self employment. See Appendix 2, Table 2 for a list of legislated datasets the Tax Office
regularly receives, and the legislation under which the data is provided.

19
reduceȱ postȬassessmentȱ processingȱ complianceȱ activityȱ andȱ provideȱ theȱ
education,ȱassistanceȱandȱinformationȱservicesȱmoreȱcostȬeffectively.ȱȱ
30. DevelopmentsȱreviewedȱinȱthisȱReportȱhaveȱtheȱpotentialȱtoȱenableȱtheȱ
TaxȱOfficeȱtoȱrespondȱtoȱtheȱchallengeȱofȱoptimisingȱcomplianceȱinȱaȱwayȱthatȱ
isȱ moreȱ efficientȱ andȱ effectiveȱ thanȱ previouslyȱ possible.ȱ Theseȱ developmentsȱ
includeȱtheȱcontinuingȱrollȱoutȱofȱonȬlineȱandȱwebȬbasedȱservicesȱsupportedȱbyȱ
theȱ technologicalȱ innovationsȱ ofȱ theȱ ECMPȱ Changeȱ Programȱ andȱ theȱ dataȱ
matchingȱandȱanalyticsȱcapability.ȱȱ
Key findings by chapter

Chapter 2: Legislative and Policy Framework
31. Chapterȱ 2ȱ identifiesȱ theȱ keyȱ featuresȱ ofȱ theȱ legislativeȱ frameworkȱ forȱ
theȱ Taxȱ Office’sȱ dataȱ matchingȱ activities,ȱ andȱ reviewsȱ theȱ Taxȱ Office’sȱ
adherenceȱtoȱprivacyȱlegislation.ȱ
32. ExternalȱdataȱtheȱTaxȱOfficeȱusesȱforȱdataȱmatchingȱandȱanalyticsȱ(andȱ
otherȱactivities)ȱisȱacquiredȱviaȱfourȱmainȱavenues,ȱnamely:ȱ
x datasetsȱ providedȱ byȱ anȱ externalȱ partyȱ toȱ theȱ Taxȱ Officeȱ asȱ aȱ resultȱ ofȱ
specificȱ legislativeȱ requirementsȱ (e.g.ȱ Annualȱ Investmentȱ Incomeȱ
Reportsȱ providedȱ byȱ financialȱ institutions).ȱ Theseȱ legislatedȱ dataȱ setsȱ
coverȱmajorȱincomeȱstreamsȱsuchȱasȱsalaryȱandȱwagesȱandȱinterestȱandȱ
dividends,ȱbutȱdoȱnotȱcoverȱotherȱincomeȱstreamsȱsuchȱasȱcapitalȱgains,ȱ
netȱrents,ȱandȱincomeȱfromȱselfȱemployment;ȱȱ
x datasetsȱ providedȱ byȱ aȱ governmentȱ agencyȱ toȱ theȱ Taxȱ Office,ȱ underȱ
memorandumsȱofȱunderstandingȱ(e.g.ȱstateȱrevenueȱoffices);ȱȱ
x commerciallyȱ availableȱ datasetsȱ purchasedȱ byȱ theȱ Taxȱ Officeȱ (e.g.ȱ
electoralȱrollȱdata);ȱandȱ
x datasetsȱrequisitionedȱbyȱtheȱTaxȱOfficeȱusingȱlegislativeȱauthority,ȱonȱaȱ
nonȬroutineȱbasis,ȱforȱdataȱmatchingȱandȱanalyticsȱprojectsȱ(e.g.ȱdataȱisȱ
requisitionedȱ fromȱ sellersȱ ofȱ luxuryȱ vehiclesȱ toȱ assistȱ inȱ detectingȱ
undeclaredȱincomeȱandȱidentifyȱotherȱtaxȱrisks).ȱȱ
33. Inȱ theȱ past,ȱ theȱ Taxȱ Officeȱ sometimesȱ usedȱ differentȱ approachesȱ toȱ
decideȱ whichȱ ofȱ theȱ Commissionerȱ ofȱ Taxation’sȱ powersȱ wereȱ toȱ beȱ usedȱ inȱ
procuringȱdata.ȱEnhancedȱconsultationȱwithȱallȱbusinessȱlinesȱandȱtheȱOfficeȱofȱ
theȱChiefȱKnowledgeȱOfficerȱduringȱtheȱprojectȱplanningȱstageȱwouldȱassistȱinȱ
ensuringȱthatȱdataȱisȱacquiredȱunderȱtheȱappropriateȱlegislativeȱauthority,ȱtheȱ

20
Summary
complianceȱburdenȱonȱdataȱprovidersȱisȱminimised,ȱandȱenableȱtheȱoptimalȱuseȱ
ofȱtheȱdataȱbyȱtheȱTaxȱOffice.ȱ
34. TheȱOfficeȱofȱtheȱPrivacyȱCommissionerȱhasȱpublishedȱTheȱUseȱofȱDataȱ
Matchingȱ inȱ Commonwealthȱ Administrationȱ –ȱ Guidelinesȱ (theȱ Guidelines).ȱ Theseȱ
containȱ aȱ numberȱ ofȱ proceduresȱ toȱ ensureȱ dataȱ matchingȱ activitiesȱ areȱ
designedȱandȱconductedȱinȱaccordanceȱwithȱsoundȱprivacyȱprinciples.ȱTheȱTaxȱ
Officeȱ has,ȱ asȱ requiredȱ byȱ theȱ Guidelines,ȱ submittedȱ toȱ theȱ Privacyȱ
Commissionerȱ Dataȱ Matchingȱ Programȱ Protocolsȱ forȱ itsȱ dataȱ matchingȱ projects,ȱ
announcedȱitsȱintentionȱtoȱconductȱauthorisedȱdataȱmatchingȱprojectsȱthroughȱ
theȱ Commonwealthȱ Gazette,ȱ andȱ submittedȱ projectȱ evaluationsȱ toȱ theȱ Privacyȱ
Commissioner.ȱTableȱ1ȱprovidesȱdetailsȱofȱtheȱTaxȱOffice’sȱsubmissionsȱtoȱtheȱ
Privacyȱ Commissioner,ȱ andȱ announcementsȱ inȱ theȱ Commonwealthȱ Gazetteȱ
sinceȱinceptionȱofȱtheȱDMSCȱinȱ2003.ȱTheȱANAOȱnotesȱthatȱasȱcomplianceȱwithȱ
theȱ Guidelinesȱ isȱ voluntary,ȱ theȱ Privacyȱ Commissionȱ reviewsȱ theȱ Taxȱ Office’sȱ
submissions,ȱprovidingȱtheȱTaxȱOfficeȱwithȱcomment,ȱnotȱapproval.ȱȱ
Table 1
Tax Office submissions to the Privacy Commissioner, 2003–04 to
2006–07
Tax Office data matching
2002–03 2003–04 2004–05 2005–06 2006–07
projects
Data matching privacy protocols
reviewed by the Privacy Commissioner
1 12 9 10 12
Notices of intention to conduct data

matching published in the 1 12 9 10 13
Commonwealth Gazette Notices
Requests for exemptions from data
matching privacy protocols reviewed by 0 0 1 0 4
the Privacy Commissioner
Evaluations of data matching projects
submitted to the Privacy Commissioner
1 12 0 0 0
Source: Tax Office
35. Theȱ Taxȱ Officeȱ couldȱ broadenȱ theȱ announcementȱ ofȱ dataȱ matchingȱ
projectsȱbyȱdirectlyȱadvisingȱtaxȱagents 11 ȱofȱgazettedȱdataȱmatchingȱprojectsȱasȱ
wellȱasȱcommunicatingȱtheseȱprojectsȱthroughȱtheȱTaxȱOffice’sȱmarketingȱandȱ
educationȱchannels.ȱ
11
Tax agents prepare about 73 per cent of individual, and over 95 per cent of business tax returns.

21
36. Aȱnumberȱofȱrecentȱdevelopmentsȱhaveȱaȱbearingȱonȱtheȱapplicabilityȱofȱ
theȱGuidelinesȱtoȱcontemporaryȱdataȱmatchingȱpracticesȱinȱtheȱTaxȱOffice.ȱTheseȱ
includeȱ rapidȱ advancesȱ inȱ technology,ȱ changingȱ communityȱ perceptions,ȱ andȱ
expansionȱofȱdataȱmatchingȱactivity.ȱ
Chapter 3: data matching and analytics capability in the Tax Office

37. Inȱ thisȱ reportȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ includesȱ aȱ rangeȱ ofȱ
computerȬbasedȱ methodologiesȱ thatȱ haveȱ theȱ commonȱ featureȱ ofȱ bringingȱ
togetherȱ andȱ comparingȱ largeȱ volumesȱ ofȱ dataȱ fromȱ differentȱ sources.ȱ Theȱ
capabilityȱ includesȱ allȱ ofȱ theȱ computerȬbasedȱ methodologiesȱ thatȱ theȱ Taxȱ
Officeȱappliesȱto:ȱȱ
x makeȱcomparisons;ȱȱ
x linkȱdataȱsets;ȱȱ
x compareȱcorrespondingȱitems;ȱȱ
x findȱrelationshipsȱandȱpatterns;ȱandȱȱ
x constructȱdescriptiveȱorȱhypotheticalȱrepresentationalȱand/orȱfunctionalȱ
relationshipsȱofȱvariablesȱofȱwhichȱtheȱdataȱisȱcomposed. 12 ȱȱ
38. Whilstȱ thereȱ areȱ considerableȱ technicalȱ differencesȱ betweenȱ theȱ
algorithmsȱwhichȱmakeȱupȱtheȱmethodologiesȱused,ȱandȱtheȱparticularȱusesȱtoȱ
whichȱ theȱ methodologiesȱ areȱ put,ȱ allȱ theȱ methodologiesȱ atȱ theȱ corporateȱ andȱ
strategicȱ levelȱ haveȱ theȱ commonȱ featureȱ ofȱ bringingȱ togetherȱ andȱ comparingȱ
largeȱvolumesȱofȱdataȱfromȱdifferentȱsources.ȱȱ
39. Theȱ Taxȱ Officeȱ appliesȱ theseȱ methodologiesȱ forȱ aȱ rangeȱ ofȱ complianceȱ
improvementȱandȱrevenueȱcollectionȱinitiatives,ȱtoȱimproveȱservices,ȱtoȱbetterȱ
understandȱcomplianceȱrisksȱandȱbehaviour,ȱandȱtoȱbetterȱmanageȱthoseȱrisks.ȱȱ
40. Dataȱ matchingȱ andȱ analyticsȱ capabilityȱ notȱ onlyȱ consistsȱ ofȱ theseȱ
computerȬbasedȱ methodologiesȱ butȱ alsoȱ includesȱ theȱ advancedȱ professionalȱ
skillsȱofȱtheȱstaffȱwhoȱdevelopȱtheȱsoftwareȱandȱinterpretȱtheȱresultsȱgeneratedȱ
byȱ theȱ software,ȱ andȱ specialisedȱ informationȱ technologyȱ softwareȱ andȱ
hardware.ȱȱ
41. Dataȱmatchingȱandȱanalyticsȱcapabilityȱisȱaȱkeyȱcompetencyȱorȱresourceȱ
thatȱ theȱ Taxȱ Officeȱ hasȱ developed,ȱ beginningȱ withȱ theȱ traditionalȱ computerȬ
12
Tax Office executives have been increasingly drawing on the interrelationships and conceptual
commonalities of Tax Office data matching and analytics activity.

22
Summary
basedȱdataȱmatchingȱthatȱbeganȱseveralȱdecadesȱago. 13 ȱTheȱcapabilityȱsupportsȱ
theȱ Taxȱ Office’sȱ managementȱ ofȱ complianceȱ riskȱ havingȱ regardȱ toȱ theȱ
understandingȱ ofȱ complianceȱ behaviourȱ summarisedȱ inȱ theȱ Complianceȱ
Model.ȱTheȱpreviousȱCommissionerȱofȱTaxationȱstated:ȱ
Itȱisȱclearȱthatȱdataȱmatchingȱisȱanȱefficientȱandȱeffectiveȱwayȱtoȱhelpȱensureȱtheȱ
integrityȱofȱourȱrevenueȱsystem.ȱForȱthisȱreasonȱweȱareȱcontinuingȱtoȱexploreȱ
waysȱ toȱ improveȱ ourȱ dataȱ matchingȱ capabilityȱ andȱ toȱ focusȱ dataȱ matchingȱ
exercisesȱonȱgenuineȱrisksȱtoȱtheȱcommunity’sȱrevenueȱbase. 14ȱ
42. TheȱTaxȱOffice’sȱdataȱmatchingȱandȱanalyticsȱcapabilityȱextendsȱbeyondȱ
itsȱ traditionalȱ notionȱ ofȱ dataȱ matchingȱ (e.g.ȱ identityȱ matching,ȱ incomeȱ
matchingȱ usingȱ theȱ ATOmsȱ andȱ DMSCȱ facilitatedȱ dataȱ matchingȱ complianceȱ
projects)ȱandȱencompassesȱtheȱfullȱspectrumȱofȱTaxȱOfficeȱdataȱmatchingȱandȱ
analyticsȱ activity.ȱ Theȱ Taxȱ Office’sȱ Complianceȱ Modelȱ emphasisesȱ thatȱ theȱ
provisionȱofȱservicesȱtoȱtaxpayersȱisȱtheȱmostȱappropriateȱTaxȱOfficeȱresponseȱ
toȱ complianceȱ risksȱ presentedȱ byȱ theȱ majorityȱ ofȱ taxpayers.ȱ Theȱ ANAOȱ
consideredȱthereȱwasȱpotentialȱforȱtheȱ‘provisionȱofȱservices’ȱtoȱbeȱincludedȱinȱ
theȱcriteriaȱforȱdataȱmatchingȱandȱanalyticsȱprojects.ȱȱ
43. RecentȱspeechesȱbyȱtheȱTaxȱCommissionerȱalsoȱtakeȱaȱbroadȱviewȱofȱtheȱ
capability:ȱ
Asȱ ourȱ Integratedȱ Coreȱ Processingȱ matures,ȱ weȱ willȱ beȱ ableȱ toȱ developȱ moreȱ
refinedȱriskȱmodelsȱwithȱwiderȱdataȱwarehousing,ȱanalytics,ȱandȱdataȱminingȱ
andȱmatchingȱcapabilities.ȱTheseȱcapabilitiesȱwillȱmeanȱthatȱweȱwillȱbeȱableȱtoȱ
betterȱ differentiateȱ betweenȱ thoseȱ taxpayersȱ whoȱ areȱ tryingȱ toȱ doȱ theȱ rightȱ
thingȱandȱthoseȱthatȱareȱnot. 15ȱ
44. Legislationȱ setsȱ outȱ thatȱ quotationȱ ofȱ theȱ Taxȱ Fileȱ Numberȱ (TFN)ȱ isȱ
voluntaryȱinȱtaxȱadministration,ȱandȱtheȱuseȱofȱaȱuniqueȱnumericȱ identifierȱisȱ
13
Audit Report No.1 of 1995–96 Income Matching System, reported on the Tax Office’s computer based
system which identified discrepancies between information in tax returns and external data, noting that
the system had been in operation since late 1987.
14
Michael Carmody, Data Matching Improves Compliance, 28 September 2005, <www.ato.gov.au>
[accessed 20 February 2007].
15
Michael D’Ascenzo, Simplifying Tax Administration in a Complex World: The Challenge of Infinite
Variety, Australasian Tax Teachers Association Conference, University of Queensland, 22–24 January
2007.

23
notȱrequiredȱinȱmostȱnonȱtaxationȱsituations. 16 ȱTheȱTaxȱOfficeȱhasȱdevelopedȱitsȱ
dataȱ matchingȱ andȱ analyticsȱ capabilityȱ partlyȱ toȱ addressȱ thisȱ challenge.ȱ
Nevertheless,ȱpartlyȱbecauseȱofȱshortcomingsȱinȱtheȱqualityȱofȱthirdȱpartyȱdataȱ
sets,ȱ theȱ Taxȱ Officeȱisȱ sometimesȱ unableȱtoȱ associateȱ aȱuniqueȱ identifierȱtoȱallȱ
relevantȱrecordsȱand/orȱtoȱlinkȱsatisfactorilyȱparticularȱdataȱitemsȱinȱthirdȱpartyȱ
dataȱsetsȱ toȱentriesȱ inȱ taxȱreturnsȱthatȱ shouldȱ correspond.ȱ Additionalȱforensicȱ
investigationsȱ areȱ sometimesȱ necessary.ȱ Theȱ ANAOȱ notedȱ theseȱ featuresȱ doȱ
notȱapplyȱinȱaȱnumberȱofȱsovereignȱstatesȱthatȱareȱmembersȱofȱtheȱOECD.ȱȱ
45. TheȱTaxȱOfficeȱisȱmovingȱintoȱanȱenvironmentȱwhichȱwillȱincreasinglyȱ
dependȱonȱmakingȱbetterȱuseȱofȱtheȱdataȱmatchingȱandȱanalyticsȱcapability.ȱAnȱ
exampleȱ isȱ theȱ preȬfillingȱ initiative.ȱ Theȱ Taxȱ Officeȱ beganȱ pilotingȱ theȱ preȬ
fillingȱconceptȱusingȱeȬtaxȱforȱ2004–05.ȱThisȱpilotȱwasȱlimitedȱtoȱpreȬfillingȱdataȱ
fromȱ Medicareȱ Australiaȱ andȱ Centrelink.ȱ Inȱ 2005–06ȱ theȱ Taxȱ Officeȱ expandedȱ
itsȱpreȬfillingȱpilotȱtoȱincludeȱtheȱ30ȱperȱcentȱchildcareȱrebate,ȱandȱbankȱinterestȱ
andȱ managedȱ fundȱ informationȱ fromȱ selectedȱ financialȱ institutions.ȱ Theȱ
ANAOȱ notedȱ theȱ limitedȱ rangeȱ ofȱ fieldsȱ andȱ dataȱ availableȱ forȱ preȱ fillingȱ inȱ
2005–06ȱ restrictedȱ theȱ relevanceȱ ofȱ theȱ preȱ fillingȱ pilotȱ facilityȱ toȱ aȱ relativelyȱ
smallȱ proportionȱ ofȱ eȬtaxȱ users.ȱ Inȱ 2006–07,ȱ approximatelyȱ 1.9ȱ millionȱ
individualsȱ usedȱ eȬtaxȱ toȱ lodgeȱ theirȱ return,ȱ andȱ ofȱ these,ȱ approximatelyȱ
1.1ȱmillionȱ usedȱ preȬfilling.ȱ Aȱ furtherȱ 1.9ȱ millionȱ preȬfilledȱ reportsȱ forȱ
individualsȱwereȱdownloadedȱbyȱtaxȱagentsȱthroughȱtheȱTaxȱAgentȱPortal.ȱ
46. IntroductionȱofȱpreȬfillingȱrepresentsȱaȱshiftȱforȱtheȱTaxȱOffice’sȱuseȱofȱ
dataȱmatchingȱandȱanalytics.ȱItȱinvolves,ȱforȱexample:ȱ
x advisingȱ theȱ taxpayerȱ atȱ theȱ timeȱ taxȱ returnsȱ areȱ beingȱ completedȱ theȱ
informationȱtheȱTaxȱOfficeȱholdsȱrelevantȱtoȱtheȱcompletionȱofȱtheirȱtaxȱ
returns;ȱ
x aȱ shiftȱ fromȱ bulkȱ postȬassessmentȱ incomeȱ dataȱ matchingȱ toȱ preȬfillingȱ
ofȱelectronicȱreturns; 17 ȱandȱȱ
16
A taxpayer (that is, a person, company, partnership, trust or superannuation fund) is not compelled to
quote their TFN in any of their dealings with the Tax Office. This makes Australia unusual amongst
nations with TFN type identifiers. Since 1990 legislation governing the use of the TFN for the receipt of
most Commonwealth income support payments has required that people claiming, or receiving, this
assistance have to provide a TFN as a condition of receiving such payments. TFN withholding taxes are
imposed (subject to several exemptions) for not quoting a TFN for specific financial transactions (such as
the interest earned on investment accounts). The TFN withholding tax imposed is at the top marginal tax
rate (plus the Medicare levy) and applied to the interest earned above a minimum threshold of $120 per
annum for interest earned and to each $1 earned as dividends. The top marginal tax rate (plus the
Medicare levy) is imposed on the actual salary and wage income being paid for not quoting the TFN on
the Employment Declaration Form regardless of the actual income. For further details see Audit Report
No.37 1998-99 Management of Tax File Numbers Australian Taxation Office.
17
Commissioner's online update, May 2005.

24
Summary
x theȱ provisionȱ ofȱ webȬbasedȱ servicesȱ thatȱ canȱ onlyȱ beȱ enabledȱ byȱ dataȱ
matchingȱandȱanalyticsȱusingȱmultiple,ȱhighȱintegrityȱdataȱbases.ȱ
47. TheȱANAOȱreviewedȱtheȱTaxȱOffice’sȱuseȱofȱdataȱacquiredȱbyȱdifferentȱ
avenues:ȱ datasetsȱ providedȱ byȱ theȱ Taxȱ Officeȱ asȱ aȱ resultȱ ofȱ legislativeȱ
requirements;ȱ datasetsȱ providedȱ byȱ Governmentȱ agenciesȱ underȱ
memorandumsȱ ofȱ understanding;ȱ commerciallyȱ availableȱ datasets;ȱ andȱ
datasetsȱ requisitionedȱ byȱ theȱ Taxȱ Officeȱ usingȱ itsȱ legislativeȱ authority.ȱ Theȱ
AustralianȱTaxȱOffice’sȱmatchingȱsystemȱ(ATOms)ȱautomaticallyȱmatchesȱdataȱ
fromȱlegislatedȱdataȱsourcesȱagainstȱdataȱtaxpayersȱprovideȱdirectlyȱtoȱtheȱTaxȱ
Office.ȱATOmsȱdetectsȱdiscrepanciesȱinȱstatedȱincome,ȱandȱproducesȱaȱpoolȱofȱ
casesȱ thatȱ mayȱ beȱ selectedȱ forȱ complianceȱ activity.ȱ Processingȱ statisticsȱ andȱ
amountsȱ ofȱ additionalȱ revenueȱ collectedȱ fromȱ automatedȱ dataȱ matchingȱ areȱ
collatedȱ andȱ inȱ someȱ yearsȱ haveȱ beenȱ publishedȱ inȱ theȱ Taxȱ Office’sȱ annualȱ
complianceȱ programȱ report.ȱ Tableȱ 2ȱ summarisesȱ theȱ Taxȱ Office’sȱ automatedȱ
dataȱmatchingȱusingȱATOmsȱforȱtheȱlastȱthreeȱavailableȱfinancialȱyearsȱ(detailsȱ
forȱ2006–07ȱareȱnotȱyetȱavailable).ȱ
Table 2
Automated data matching using Annual Investment Income Report (AIIR)
and Dividend and Interest Schedule data, Pay-As-You-Go (PAYG) data
(e.g. salary, lump sums, fringe benefits), Centrelink data (e.g. various
benefits and allowances, pensions), and Medicare Australia data (e.g.
private health insurance premiums, Medicare levy surcharge data)
Automated data matching using the
2003–04 2004–05 2005–06
income matching system
- Number of individual records identity matched 33,341,168 33,772,052 33,645,672
- Number of individual records identity matched at a high 28,222,567 28,640,996 28,603,493

level of confidence
- Number of individual records subject to income matching 17,306,225 17,643,022 17,582,283

as a tax return had been lodged
- Number of potentially discrepant cases 320,211 345,274 132,243

- Number of discrepant cases selected for actioning 276,019 332,738 80,297
- Liabilities raised ($ millions) 141.9 203.3 80.3
Notes:
1. The numbers refer to numbers of records, not numbers of individual persons, as individuals can be
matched for more than one data type.
2. Processing for 2005–06 has not yet been completed. See additional table notes in the Report.
Source: Tax Office.

25
Chapter 4: Governance and Coordination Arrangements
48. Theȱ administrationȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ isȱ
necessarilyȱdistributedȱacrossȱtheȱTaxȱOfficeȱasȱtheȱcapabilityȱisȱintegralȱtoȱtaxȱ
administration.ȱ Theȱ Taxȱ Officeȱ establishedȱ theȱ DMSCȱ toȱ pursueȱ aȱ rangeȱ ofȱ
objectives.ȱ Theseȱ includeȱ theȱ coordinationȱ andȱ facilitationȱ ofȱ bestȱ corporateȱ
resultsȱfromȱtheȱdataȱmatchingȱcomponentȱofȱtheȱcapability;ȱsupportingȱotherȱ
coordinationȱ andȱ consultativeȱ arrangements;ȱ encouragingȱ bestȱ practiceȱ andȱ
intraȬbusinessȱ lineȱ consultation.ȱ Theseȱ arrangementsȱ haveȱ generallyȱ workedȱ
wellȱ andȱ theȱ DMSCȱ hasȱ beenȱ pivotalȱ toȱ resultsȱ theȱ Taxȱ Officeȱ hasȱ achievedȱ
fromȱ theȱ deploymentȱ ofȱ theȱ capability.ȱ Inȱ theȱ future,ȱ increasedȱ coordinationȱ
betweenȱ theȱ OCKO’sȱ Analyticsȱ groupȱ andȱ theȱ DMSCȱ wouldȱ helpȱ ensureȱ theȱ
twoȱ areasȱ proceedȱ jointlyȱ andȱ efficientlyȱ withȱ respectȱ toȱ strategicȱ planning,ȱ
prioritisationȱofȱprojectsȱandȱcommunityȱconsultation.ȱ
49. Theȱ Taxȱ Office’sȱ dataȱ matchingȱ practicesȱ areȱ wellȱ established.ȱ Theȱ
DMSCȱ hasȱ facilitatedȱ aȱ moreȱ corporateȱ andȱ strategicȱ useȱ ofȱ dataȱ matchingȱ asȱ
anȱ integralȱ componentȱ ofȱ taxȱ administration.ȱ Thisȱ hasȱ resultedȱ inȱ improvedȱ
compliance,ȱ increasedȱ revenue,ȱ improvedȱ servicesȱ andȱ theȱmoreȱ efficientȱ andȱ
effectiveȱ useȱ ofȱ resources.ȱ Itȱ hasȱ alsoȱ enabledȱ theȱ Taxȱ Officeȱ toȱ betterȱ
understandȱrisks.ȱTheȱproceduralȱarrangementsȱestablishedȱbyȱtheȱDMSCȱhaveȱ
enabledȱtheȱTaxȱOfficeȱtoȱimproveȱtheȱuseȱofȱdataȱmatchingȱandȱcomplyȱwithȱ
PrivacyȱCommissionerȱGuidelines.ȱȱ
50. Theȱ Taxȱ Officeȱ wouldȱ benefitȱ fromȱ theȱ consolidationȱ atȱ theȱ corporateȱ
levelȱofȱknowledgeȱofȱtheȱscope,ȱachievements,ȱlessonsȱlearntȱandȱpotentialȱofȱ
dataȱmatchingȱandȱanalytics.ȱItȱisȱtimelyȱtoȱdoȱthisȱbecauseȱofȱthe:ȱȱ
x increasedȱ incidenceȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ workȱ overȱ theȱ lastȱ
fiveȱyears;ȱȱ
x plannedȱintroductionȱofȱtheȱECMPȱChangeȱProgram;ȱandȱȱ
x demonstrableȱ synergiesȱ betweenȱ dataȱ matchingȱ andȱ analyticsȱ
methodologies.ȱȱ
Recommendations
51. TheȱANAOȱmadeȱsixȱrecommendationsȱdirectedȱatȱimprovingȱtheȱTaxȱ
Office’sȱcorporateȱandȱstrategicȱmanagementȱofȱitsȱdataȱmatchingȱandȱanalyticsȱ
capability.ȱ

26
Summary
Summary of agency response

52. Theȱ Taxȱ Officeȱ welcomesȱ theȱ Australianȱ Nationalȱ Auditȱ Office’sȱ
recommendationsȱ inȱ relationȱ toȱ itsȱ useȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ inȱ taxȱ
administration.ȱ
53. Dataȱ matchingȱ andȱ analyticsȱ playȱ aȱ keyȱ roleȱ inȱ modernȱ taxȱ
administration.ȱAsȱtheȱreportȱacknowledges,ȱtheȱTaxȱOfficeȱisȱrecognisedȱasȱaȱ
leaderȱinȱtheȱareaȱbyȱtaxȱauthoritiesȱinternationally.ȱȱ
54. TheȱTaxȱOfficeȱacceptsȱtheȱsixȱrecommendations.ȱ
55. Developmentsȱ inȱ technologyȱ areȱ allowingȱ theȱ Taxȱ Officeȱ toȱ moveȱ toȱ
increasinglyȱ sophisticatedȱ approachesȱ inȱ theȱ useȱ ofȱ data.ȱ Theȱ Taxȱ Officeȱ willȱ
continueȱtoȱexploreȱopportunitiesȱforȱtheȱincreasedȱuseȱofȱdataȱtoȱimproveȱtheȱ
operationȱofȱtheȱtaxȱsystem.ȱ
56. Itȱ isȱ encouragingȱ toȱ noteȱ thatȱ theȱ Australianȱ Nationalȱ Auditȱ Officeȱ
supportsȱtheȱshiftȱtheȱTaxȱOfficeȱisȱmakingȱtoȱuseȱdataȱmatchingȱtoȱsupportȱaȱ
rangeȱofȱserviceȱinitiatives.ȱAsȱnotedȱinȱtheȱreport,ȱtheseȱincludeȱtheȱexpandedȱ
preȬfillingȱ initiativeȱ andȱ theȱ extendedȱ useȱ ofȱ thirdȱ partyȱ informationȱ (forȱ
example,ȱrealȱpropertyȱdata)ȱtoȱassistȱtaxpayersȱinȱcorrectlyȱpreparingȱincomeȱ
taxȱ returns,ȱ ratherȱ thanȱ usingȱ thisȱ dataȱ exclusivelyȱ toȱ supportȱ postȱ issueȱ
complianceȱchecks.ȱȱ
57. TheȱTaxȱOffice’sȱfullȱresponseȱcanȱbeȱfoundȱinȱAppendixȱ1.ȱ

27
Recommendations
Recommendation Theȱ ANAOȱ recommendsȱ theȱ Taxȱ Office,ȱ asȱ theȱ primaryȱ
No.1 userȱ ofȱ theȱ Privacyȱ Commissioner’sȱ Dataȱ Matchingȱ
Para 2.15 Guidelines:ȱ
x initiateȱ policyȬlevelȱ discussionȱ withȱ theȱ Officeȱ ofȱ
theȱ Privacyȱ Commissionerȱ withȱ aȱ viewȱ toȱ
updatingȱ theȱ 1998ȱ publication,ȱ “Theȱ Useȱ ofȱ Dataȱ
Matchingȱ inȱ Commonwealthȱ Administrationȱ –ȱ
Guidelines”;ȱandȱ
x asȱ appropriate,ȱ subsequentlyȱ reviseȱ theȱ Taxȱ
Office’sȱ dataȱ matchingȱ protocol,ȱ toȱ reflectȱ anyȱ
changes.ȱ
ATOȱResponse:ȱAgreedȱ
Recommendation Theȱ ANAOȱ recommendsȱ thatȱ inȱ orderȱ toȱ achieveȱ

No.2 additionalȱefficienciesȱtoȱtaxȱadministrationȱandȱimproveȱ
Para 3.41 theȱ integrityȱ ofȱ keyȱ taxȱ dataȱ bases,ȱ theȱ Taxȱ Officeȱ
improveȱ nonȬindividualȱ identityȱ matching,ȱ giveȱ furtherȱ
considerationȱ toȱ theȱ negativeȱ searchȱ proofȬofȬconceptȱ
facilityȱandȱcontinueȱtoȱreviewȱoptionsȱtoȱimproveȱitsȱkeyȱ
identityȱmatchingȱfacility.ȱ

28
Recommendations
Recommendation Theȱ ANAOȱ recommendsȱ thatȱ toȱ simplifyȱ incomeȱ taxȱ

No.3 returnsȱbyȱprovidingȱpreȬfillingȱforȱincreasedȱnumbersȱofȱ
Para 3.94 taxpayersȱ theȱ Taxȱ Officeȱ discussȱ withȱ theȱ Treasuryȱ
optionsȱinȱrelationȱtoȱtheȱpreȬfillingȱinitiative,ȱnamely:ȱ
x bringingȱ theȱ datesȱ forwardȱ forȱ theȱ provisionȱ ofȱ
requisiteȱthirdȱpartyȱdata;ȱȱ
x mandatingȱ electronicȱ transmissionȱ inȱ aȱ rangeȱ ofȱ
areas;ȱandȱȱ
x includingȱ theȱ TFNȱ onȱ someȱ additionalȱ dataȱ sets,ȱ
havingȱ regardȱ toȱ theȱ needȱ toȱ balanceȱ privacyȱ
concernsȱ andȱ improvingȱ theȱ efficiencyȱ andȱ
effectivenessȱofȱpublicȱadministration.ȱȱȱ
Recommendation Theȱ ANAOȱ recommendsȱ thatȱ theȱ Taxȱ Officeȱ developȱ aȱ

No.4 threeȱ toȱ fiveȱ yearȱ corporateȱ andȱ strategicȱ planȱ forȱ theȱ
Para 3.121 acquisitionȱandȱuseȱofȱexternalȱdata.ȱȱ
Recommendation Toȱ minimiseȱ duplicationȱ andȱ closeȱ gapsȱ inȱ

No.5 responsibilitiesȱ andȱ streamlineȱ coȬordinationȱ
Para 4.7 arrangements,ȱ theȱ ANAOȱ recommendsȱ theȱ Taxȱ Officeȱ
clarifyȱtheȱrolesȱofȱtheȱvariousȱcommitteesȱrelevantȱtoȱtheȱ
managementȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ
capability,ȱ soȱ theirȱ individualȱ responsibilitiesȱ areȱ
integratedȱmoreȱclosely.ȱ
Recommendation Toȱ improveȱ theȱ efficiencyȱ andȱ effectivenessȱ ofȱ theȱ

No.6 corporateȱ andȱ strategicȱ managementȱ ofȱ theȱ dataȱ
Para 4.21 matchingȱandȱanalyticsȱcapabilityȱandȱinformȱtheȱfurtherȱ
developmentȱ ofȱ theȱ capability,ȱ theȱ ANAOȱ recommendsȱ
thatȱ theȱ Taxȱ Officeȱ completeȱ aȱ highȱ levelȱ ‘stockȱ take’ȱ ofȱ
achievementsȱandȱlessonsȱlearnedȱfromȱitsȱdeployment.ȱȱ

29
ȱ
ȱ

30
Audit Findings
and Conclusions

31
32
1. Background and Context
Thisȱchapterȱprovidesȱanȱoverviewȱofȱdataȱmatching,ȱandȱtheȱTaxȱOffice’sȱuseȱofȱdataȱ
matchingȱinȱtaxȱadministration,ȱandȱoutlinesȱtheȱauditȱobjectiveȱandȱmethodology.ȱ
The Australian Taxation Office

1.1 TheȱAustralianȱTaxationȱOfficeȱ(TaxȱOffice)ȱisȱresponsibleȱforȱeffectivelyȱ
managingȱandȱshapingȱadministrativeȱsystemsȱthatȱsupportȱandȱfundȱservicesȱ
forȱAustralians,ȱandȱgiveȱeffectȱtoȱsocialȱandȱeconomicȱpolicyȱthroughȱtheȱtax,ȱ
superannuation,ȱ exciseȱ andȱ otherȱ relatedȱ systems.ȱ Inȱ 2006–07,ȱ itȱ collectedȱ
$254.8ȱbillionȱ (net)ȱ inȱ tax,ȱ superannuationȱ andȱ exciseȱ revenue. 18 ȱ Itsȱ operatingȱ
expenditureȱ budgetȱ wasȱ $2661.8ȱ million,ȱ andȱ asȱ atȱ 30ȱ Juneȱ 2007ȱ itȱ employedȱ
22ȱ342ȱstaff.ȱ
1.2 InȱaȱselfȬassessmentȱsystemȱandȱwithȱlimitedȱresources,ȱrevenueȱbodiesȱ
needȱeffectiveȱandȱefficientȱmeansȱforȱachievingȱveryȱhighȱlevelsȱofȱvoluntaryȱ
compliance.ȱ Inȱ termsȱ ofȱ resourceȱ investments,ȱ auditsȱ haveȱ traditionallyȱ
constitutedȱ theȱ primaryȱ formȱ ofȱ verificationȱ adoptedȱ byȱ revenueȱ bodies,ȱ
includingȱtheȱTaxȱOffice.ȱHowever,ȱthereȱareȱlimitationsȱconcerningȱtheȱlevelȱofȱ
taxpayerȱ andȱ incomeȱ coverageȱ achievableȱ fromȱ auditȱ activities.ȱ Onȱ theȱ otherȱ
hand,ȱlargeȱscaleȱdataȱmatchingȱactivityȱinȱrelationȱtoȱtheȱcategoriesȱofȱincomeȱ
isȱ aȱ powerfulȱ toolȱ forȱ validatingȱ andȱ disclosingȱ muchȱ ofȱ theȱ incomeȱ reportedȱ
byȱtaxpayersȱinȱtheirȱreturns.ȱ
Data matching
1.3 Atȱitsȱmostȱfundamentalȱlevel,ȱdataȱmatchingȱisȱtheȱlinkingȱofȱdatasetsȱ
andȱ comparisonȱ ofȱ correspondingȱ dataȱ items.ȱ Withȱ respectȱ toȱ publicȱ
administration,ȱdataȱmatchingȱhasȱbeenȱdefinedȱasȱ’theȱlargeȱscaleȱcomparisonȱ
ofȱ recordsȱ orȱ filesȱ ofȱ personalȱ information,ȱ collectedȱ orȱ heldȱ forȱ differentȱ
purposes,ȱwithȱaȱviewȱtoȱidentifyingȱmattersȱofȱinterest’. 19ȱ
Data matching legislation and guidelines

1.4 TheȱDataȬmatchingȱProgramȱ(AssistanceȱandȱTax)ȱActȱ1990ȱ(DataȬmatchingȱ
Act)ȱ regulatesȱ useȱ ofȱ Taxȱ Fileȱ Numbersȱ (TFN)ȱ inȱ comparingȱ personalȱ
18
Australian Taxation Office, Annual Report 2006–07, p. 283.
19
Office of the Privacy Commissioner, The Use of Data Matching in Commonwealth Administration–
Guidelines, February 1998.

33
informationȱ heldȱ byȱ theȱ Taxȱ Officeȱ andȱ byȱ otherȱ agenciesȱ suchȱ asȱ Centrelinkȱ
andȱtheȱDepartmentȱofȱVeteransȇȱAffairs.ȱȱ
1.5 Forȱ dataȱ matchingȱ activities,ȱ otherȱ thanȱ theȱ programsȱ specificallyȱ
regulatedȱ byȱ theȱ DataȬmatchingȱ Act,ȱ theȱ Privacyȱ Commissionerȱ hasȱ issuedȱ
voluntaryȱ advisoryȱ guidelinesȱ forȱ dataȱ matchingȱ inȱ Commonwealthȱ
administration. 20 ȱ Privacyȱ aspectsȱ ofȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ areȱ
discussedȱinȱChapterȱ2ȱ–ȱLegislativeȱandȱPolicyȱFramework.ȱ
Data matching in the Tax Office

1.6 DataȱmatchingȱhasȱbeenȱaȱfeatureȱofȱtaxȱadministrationȱinȱAustraliaȱforȱ
manyȱdecades.ȱInitiallyȱdataȱmatchingȱinȱtheȱTaxȱOfficeȱwasȱaȱmanualȱactivity.ȱ
Forȱexample,ȱfromȱ1936ȱonwards,ȱwhenȱtheȱTaxȱOfficeȱfirstȱreceivedȱstatementsȱ
ofȱ interestȱ fromȱ theȱ banks,ȱ itȱ wasȱ ableȱ toȱ checkȱ ifȱ individualȱ taxȱ payersȱ
correctlyȱreportedȱinterestȱearnings.ȱDuringȱtheȱ1970sȱtheȱTaxȱOfficeȱmovedȱtoȱ
computerȱ basedȱ dataȱ matchingȱ systems.ȱ Inȱ theȱ lateȱ 1980s,ȱ afterȱ Parliamentȱ
passedȱtheȱTFNȱlegislation,ȱtheȱTaxȱOfficeȱimplementedȱtheȱautomatedȱIncomeȱ
Matchingȱ System.ȱ Thisȱ systemȱ hasȱ beenȱ progressivelyȱ improved.ȱ Theȱ dataȱ
matchingȱ systemȱ thatȱ hasȱ evolvedȱ isȱ theȱ Australianȱ Taxationȱ Officeȱ matchingȱ
systemȱ(ATOms).ȱ21 ȱȱ
Data acquisition and identity matching

1.7 TheȱTaxȱOffice’sȱ dataȱ matchingȱcapabilityȱ isȱ underpinnedȱbyȱ theȱneedȱ
toȱfirstȱobtainȱdatasetsȱtoȱmatch,ȱtoȱconfirmȱandȱvalidateȱtheȱidentityȱofȱentitiesȱ
andȱthenȱtoȱlinkȱtwoȱorȱmoreȱdatasetsȱtoȱmatchȱinformation.ȱ
Data acquisition
1.8 Dataȱ isȱ providedȱ directlyȱ toȱ theȱ Taxȱ Officeȱ byȱ taxpayersȱ (individualsȱ
andȱentities)ȱandȱbyȱtaxȱagents.ȱAlmostȱallȱofȱtheȱdataȱreceivedȱfromȱtaxpayersȱ
andȱ taxȱ agentsȱ isȱ receivedȱ viaȱ annualȱ Incomeȱ Taxȱ Returns,ȱ andȱ monthlyȱ andȱ
quarterlyȱBusinessȱActivityȱStatements.ȱTheȱTaxȱOfficeȱalsoȱobtainsȱsignificantȱ
quantitiesȱ ofȱ thirdȱ partyȱ dataȱ (i.e.ȱ externalȱ data)ȱ fromȱ federalȱ andȱ stateȱ
governmentȱ agencies,ȱ asȱ wellȱ asȱ theȱ privateȱ sector.ȱ Forȱ example,ȱ federalȱ
20
The Office of the Privacy Commissioner is an independent office which has responsibilities under the
Privacy Act 1988 (Cwth). The Privacy Commissioner notes that data-matching poses a particular threat
to personal privacy because it involves analysing information about large numbers of people without prior
cause for suspicion.
21
ATOms refers to a number of systems, including the Information Matching Analysis and Selection
System, Case Actioning System and Compliance Online Enquiry and Amendment System.

34
Background and Context
governmentȱ agenciesȱ provideȱ reportsȱ ofȱ benefitsȱ andȱ pensionsȱ paid,ȱ whileȱ
reportsȱofȱwagesȱandȱinterestȱincomeȱareȱprovidedȱbyȱprivateȱsectorȱentities.ȱȱ
1.9 Thisȱ externalȱ dataȱ mayȱ beȱ routinelyȱ providedȱ toȱ theȱ Taxȱ Officeȱ underȱ
specificȱ legislation,ȱ aȱ memorandumȱ ofȱ understanding,ȱ orȱ requisitionedȱ underȱ
theȱ Taxȱ Commissioner’sȱ informationȱ gatheringȱ authorityȱ onȱ anȱ adȱ hocȱ orȱ
specificȱ projectȱ basis.ȱ Dataȱ isȱ suppliedȱ toȱ theȱ Taxȱ Officeȱ throughȱ aȱ varietyȱ ofȱ
channels,ȱ suchȱ asȱ theȱ Electronicȱ Lodgementȱ Service,ȱ Taxȱ Agentȱ andȱ Businessȱ
Portals,ȱdisk,ȱorȱpaper.ȱȱ
1.10 TheȱTaxȱOfficeȱalsoȱusesȱacquiredȱdataȬsetsȱtoȱgenerateȱsomeȱdataȱthatȱ
isȱ usedȱ forȱ taxȱ administrationȱ purposes.ȱ Dataȱ acquisitionȱ isȱ discussedȱ inȱ
Chapterȱ 3ȱ –ȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ inȱ theȱ Taxȱ Office.ȱ Figureȱ 1.1ȱ
depictsȱtheȱcategoriesȱofȱdataȱreceivedȱbyȱtheȱTaxȱOffice.ȱȱ

35
Figure 1.1
Categories of data
Taxpayer Data 3rd Party Data Tax Office Data

Etc Etc Etc
BAS PAYG Activity results
Income Tax Return AIIR Mgt Reports
Provided data Legislated data Tax Office

(Taxpayers and tax Generated data
(Routinely provided
agents supply directly under specific
to Tax Office) legislation)
Etc
DIAC
State Revenue Offices
Memorandum of
Understanding
data
(Routinely provided by
Government agencies)
Etc
Luxury Vehicles
Share Registries
Requisitioned data
(Obtained by Compliance
business lines on an
ad hoc basis)
Etc
Fact of Death
Electoral Roll
Purchased data
ȱ
Source: ANAO analysis of Tax Office information. Terms such as ‘legislated data’, requisitioned data’ etc
are defined in the Glossary at the end of this Report. Abbreviations are listed at the front.
1.11 Moreȱ specificȱ detailsȱ ofȱ theȱ dataȱ setsȱ acquiredȱ byȱ theȱ Taxȱ Officeȱ areȱ
providedȱinȱAppendixȱ2.ȱ
Identity matching
1.12 Onȱ receiptȱ ofȱ thirdȱ partyȱ dataȱ theȱ Taxȱ Officeȱ initiallyȱ comparesȱ itȱ toȱ
otherȱ Taxȱ Officeȱ dataȱ inȱ orderȱ toȱ confirmȱ and/orȱ validateȱ theȱ identityȱ ofȱ theȱ
personȱ orȱ entity.ȱ Dataȱ thatȱ doesȱ notȱ containȱ anȱ Australianȱ Businessȱ Numberȱ
(ABN)ȱorȱTFNȱ(whichȱisȱtheȱcaseȱforȱdataȱprovidedȱbyȱAUSTRACȱandȱforȱmostȱ
requisitionedȱdata),ȱtheȱTaxȱOfficeȱattemptsȱtoȱattachȱtheȱappropriateȱABNȱorȱ

36
TFNȱ toȱ theȱ data. 22 ȱ Thisȱ isȱ undertakenȱ byȱ theȱ Taxȱ Office’sȱ identityȱ matchingȱ
facilityȱ whichȱ proceedsȱ toȱ matchȱ identityȱ informationȱ suchȱ asȱ ABNȱ orȱ TFN,ȱ
name,ȱdateȱofȱbirth,ȱaddressȱcontainedȱinȱtheȱthirdȱpartyȱdataȱwithȱTaxȱOfficeȱ
registrationȱ information. 23 ȱ Highestȱ confidenceȱ matchesȱ occurȱ withȱ anȱ exactȱ
matchȱ onȱ TFN,ȱ nameȱ andȱ dateȱ ofȱ birth.ȱ Thisȱ identityȱ matchingȱ enablesȱ theȱ
subsequentȱ comparisonȱ ofȱ twoȱ orȱ moreȱ datasets.ȱ Identityȱ matchingȱ isȱ
discussedȱinȱChapterȱ3ȱ–ȱDataȱMatchingȱandȱAnalyticsȱCapabilityȱinȱtheȱTaxȱOffice.ȱ
Data matching
1.13 Theȱ Taxȱ Officeȱ definesȱ dataȱ matchingȱ asȱ ‘theȱ acquisitionȱ ofȱ externalȱ
dataȱ usedȱ byȱ theȱ Taxȱ Officeȱ forȱ aȱ varietyȱ ofȱ differentȱ purposesȱ suchȱ asȱ
detectionȱ ofȱ unȬdisclosedȱ income,ȱ nonȬlodgementȱ ofȱ returnsȱ andȱ activityȱ
statements,ȱandȱentitiesȱoutsideȱtheȱtaxȱsystem.’ 24 ȱȱ
1.14 TheȱTaxȱOfficesȱundertakesȱtwoȱcategoriesȱofȱdataȱmatching:ȱ
x largeȱ scaleȱ postȬissueȱ automatedȱ systemȱ processingȱ (e.g.ȱ afterȱ theȱ
majorityȱ ofȱ taxȱ returnsȱ haveȱ beenȱ processed,ȱ ATOmsȱ automaticallyȱ
matchesȱ legislatedȱ andȱ otherȱ dataȱ againstȱ dataȱ taxpayersȱ provideȱ
directlyȱ toȱ theȱ Taxȱ Office,ȱ detectsȱ discrepanciesȱ inȱ statedȱ income,ȱ andȱ
producesȱaȱpoolȱofȱcasesȱforȱcomplianceȱ activity.ȱ Thisȱoccursȱannuallyȱ
forȱindividuals,ȱnotȱpartnershipsȱandȱtrusts);ȱandȱ
x dataȱ matchingȱ projectsȱ (e.g.ȱ Complianceȱ businessȱ lines 25 ȱ initiateȱ
projectsȱ thatȱ involveȱ acquiringȱ andȱ matchingȱ externalȱ dataȱ toȱ internalȱ
Taxȱ Officeȱ databasesȱ andȱ producingȱ aȱ poolȱ ofȱ casesȱ forȱ riskȱ
identificationȱorȱcomplianceȱactivity.ȱSeeȱAppendixȱ2,ȱTableȱ5ȱforȱaȱlistȱ
ofȱtheȱTaxȱOffice’sȱdataȱmatchingȱprojectsȱsinceȱ2000).ȱȱ
22
Only certain people and organisations are authorised by law to request quotation of a TFN. These
include employers, some Australian Government agencies, trustees for superannuation funds, payers
under the pay-as-you-go system, higher education institutions, the Child Support Agency and investment
bodies such as banks. Section 202C of the Income Tax Assessment Act 1936 authorises the Tax Office
to request quotation of a TFN, however, taxpayers are not compelled to quote their TFN in any dealings
with the Tax Office. In situations where payments of employment or investment income are made to
taxpayers, the Tax Office requires that payers withhold tax at the highest marginal rate, plus the
Medicare levy, if the taxpayer has elected not to quote their TFN and has no exemption from quoting.
23
Since the quotation of the TFN is not mandatory in Australia, there will always be transactions and
records within data bases integral to tax administration that lack this necessary numeric identifier. If the
Tax Office’s identity matching engine fails to establish with a sufficient level of confidence the identity of
the person belonging to the transaction or record, it may be necessary for Tax Office staff to investigate
these transactions or records in order to link them reliably to a person and/or entity.
24
Tax Office, External Data Matching PS CM 2004/17.
25
Compliance business lines include Large Business and International, Micro Enterprises and Individuals,
Superannuation, Serious Non Compliance, Excise, and Goods and Services Tax.

37
1.15 Traditionally,ȱ dataȱ matchingȱ inȱ theȱ Taxȱ Officeȱ hasȱ hadȱ aȱ complianceȱ
checkingȱ focus,ȱ withȱ thirdȱ partyȱ dataȱ beingȱ usedȱ toȱ verifyȱ theȱ accuracyȱ ofȱ
informationȱ reportedȱ byȱ taxpayersȱ inȱ theirȱ returns.ȱ Dataȱ matchingȱ projectsȱ
withinȱ theȱ Taxȱ Officeȱ areȱ coordinatedȱ throughȱ theȱ Dataȱ Matchingȱ Steeringȱ
Committeeȱ(DMSC).ȱ
Analytics
1.16 Theȱ Taxȱ Officeȱ alsoȱ undertakesȱ aȱ rangeȱ ofȱ analyticsȱ activitiesȱ (e.g.ȱ
discoveringȱrelationships,ȱpatternsȱandȱtrendsȱinȱdatasets)ȱusingȱdataȱprovidedȱ
directlyȱ toȱ theȱ Taxȱ Office,ȱ internallyȱ generatedȱ dataȱ (suchȱ asȱ theȱ resultsȱ ofȱ
complianceȱactivities)ȱandȱexternallyȱsourcedȱdatasets.ȱTheȱadvancedȱanalyticsȱ
workȱ basedȱ onȱ dataȱ miningȱ techniquesȱ primarilyȱ occursȱ withinȱ theȱ analyticsȱ
group,ȱ withinȱ theȱ Officeȱ ofȱ theȱ Chiefȱ Knowledgeȱ Officerȱ (OCKO);ȱ whereasȱ
basicȱ analyticsȱ workȱ usingȱ moreȱ conventionalȱ toolsȱ isȱ distributedȱ broadlyȱ
acrossȱ mostȱ businessȱ lines.ȱ Theȱ OCKOȱ isȱ aȱ relativelyȱ recentlyȱ createdȱ area,ȱ
precededȱbyȱtheȱDMSC.ȱȱ
1.17 Theȱ Taxȱ Officeȱ undertakesȱ thisȱ workȱ toȱ improveȱ theȱ understanding,ȱ
andȱ supportȱ theȱ managementȱ ofȱ compliance,ȱ especiallyȱ seriousȱ nonȬ
compliance,ȱ risks,ȱ provideȱ betterȱ servicesȱ andȱ improveȱ theȱ efficiencyȱ andȱ
effectivenessȱofȱtaxȱadministration.ȱȱ
Recent ANAO audit reports

1.18 Dataȱ matchingȱ isȱ anȱ essentialȱ featureȱ ofȱ contemporaryȱ taxȱ
administration.ȱRecentȱANAOȱAuditȱReportsȱhaveȱevaluatedȱdataȱmatchingȱinȱ
variousȱareasȱofȱtaxȱadministration.ȱTheseȱincluded:ȱ
x Auditȱ Reportȱ No.16ȱ 2006–07,ȱ Administrationȱ ofȱ Capitalȱ Gainsȱ Taxȱ
ComplianceȱinȱtheȱIndividualsȱMarketȱSegment;ȱ
x Auditȱ Reportȱ No.12ȱ 2006–07,ȱ Managementȱ ofȱ Familyȱ Taxȱ Benefitȱ
Overpayments;ȱ
x Auditȱ Reportȱ No.35ȱ 2005–06,ȱ Theȱ Australianȱ Taxationȱ Office’sȱ
AdministrationȱofȱActivityȱStatementȱHighȱRiskȱRefunds;ȱ
x Auditȱ Reportȱ No.33ȱ 2005–06,ȱ Administrationȱ ofȱ Petroleumȱ andȱ Tobaccoȱ
ExciseȱCollections,ȱfollowȬup;ȱȱ
x Auditȱ Reportȱ No.17ȱ 2005–06,ȱ Administrationȱ ofȱ theȱ Superannuationȱ Lostȱ
MembersȱRegister;ȱ

38
x AuditȱReportȱNo.47ȱ2004–05,ȱAustralianȱTaxationȱOfficeȱTaxȱFileȱNumberȱ
Integrityȱ(seeȱalsoȱAuditȱReportȱNo.37,ȱ1998–99,ȱManagementȱofȱTaxȱFileȱ
Numbers);ȱ
x Auditȱ Reportȱ No.39ȱ 2004–05,ȱ Theȱ Australianȱ Taxationȱ Officeȇsȱ
AdministrationȱofȱtheȱSuperannuationȱContributionsȱSurcharge;ȱandȱ
x Auditȱ Reportȱ No.48ȱ 2003–04,ȱ Theȱ Australianȱ Taxationȱ Office’sȱ
ManagementȱandȱUseȱofȱAnnualȱInvestmentȱIncomeȱReports.ȱ
Recent developments
Easier, Cheaper and More Personalised Change Program
1.19 TheȱTaxȱOfficeȱisȱcurrentlyȱimplementingȱmajorȱchangesȱtoȱitsȱbusinessȱ
processesȱ byȱ meansȱ ofȱ anȱ initiativeȱ calledȱ theȱ Easier,ȱ Cheaperȱ andȱ Moreȱ
Personalisedȱ (ECMP)ȱ Changeȱ Program.ȱ Inȱ itsȱ 2006–07ȱ annualȱ report,ȱ theȱ Taxȱ
Officeȱ statedȱ thatȱ theȱ ECMPȱ representedȱ aȱ $453ȱmillionȱ investmentȱ inȱ newȱ
technologyȱandȱbusinessȱreȬengineering.ȱTheȱpurposeȱofȱtheȱECMPȱisȱtoȱmakeȱ
taxpayerȱ interactionsȱ withȱ theȱ Taxȱ Officeȱ easier,ȱ cheaperȱ andȱ moreȱ
personalised,ȱ withinȱ theȱ parametersȱ allowedȱ byȱ taxȱ andȱ superannuationȱ
laws. 26 ȱ Theȱ ECMPȱ originatedȱ inȱ theȱ Taxȱ Office’sȱ 2002ȱ Listeningȱ toȱ theȱ
Communityȱ program,ȱ whenȱ theȱ Taxȱ Officeȱ workedȱ withȱ theȱ generalȱ
community,ȱsmallȱbusiness,ȱindustryȱandȱtaxȱagentsȱtoȱdevelopȱideasȱtoȱmakeȱ
improveȱtheȱTaxȱOffice.ȱTheȱChangeȱProgramȱbusinessȱline,ȱBusinessȱSolutionsȱ
businessȱ line,ȱ andȱ theȱ Chiefȱ Knowledgeȱ Officerȱ haveȱ responsibilityȱ forȱ
deliveringȱelementsȱofȱtheȱECMPȱChangeȱProgram.ȱ
Change Program business line
1.20 Theȱ Changeȱ Programȱ businessȱ lineȱ isȱ developingȱ newȱ standardisedȱ
businessȱsystemsȱandȱprocesses,ȱwhichȱwillȱbeȱapplicableȱacrossȱtheȱTaxȱOffice.ȱ
Itȱ isȱ alsoȱ developingȱ newȱ informationȱ technologyȱ systems,ȱ whichȱ areȱ beingȱ
deliveredȱ inȱ stages.ȱ Inȱ theȱ firstȱ twoȱ stages,ȱ theȱ Taxȱ Officeȱ introducedȱ aȱ newȱ
Clientȱ Relationshipȱ Managementȱsystemȱandȱimplementedȱ aȱnewȱsingleȱCaseȱ
Managementȱsystem.ȱInȱtheȱthirdȱstage,ȱtheȱTaxȱOfficeȱwillȱreplaceȱaȱrangeȱofȱ
computerȱprocessingȱsystemsȱwithȱaȱsingle,ȱintegrated,ȱsystemȱforȱallȱtaxȱtypes.ȱ
Thisȱ systemȱ isȱ currentlyȱ referredȱ toȱ asȱ anȱ Integratedȱ Coreȱ Processingȱ (ICP)ȱ
system.ȱTheȱICPȱwillȱcompriseȱoneȱregistrationȱsystem,ȱoneȱaccountingȱsystemȱ
andȱ oneȱprocessingȱsystemȱcoveringȱ allȱtaxesȱ administeredȱ byȱ theȱTaxȱ Office.ȱ
26
Australian Taxation Office, 2006, 2006–07 Making it Easier to Comply, The easier, cheaper and more
personalised program.

39
TheȱTaxȱOfficeȱplansȱtoȱimplementȱtheȱICPȱprogressivelyȱthroughoutȱ2008ȱandȱ
2009.ȱȱ
Business Solutions business line
1.21 TheȱBusinessȱSolutionsȱbusinessȱlineȱhasȱtheȱresponsibilityȱtoȱensureȱtheȱ
designȱandȱimplementationȱofȱallȱECMPȱChangeȱProgramȱtechnologyȱisȱalignedȱ
acrossȱ theȱ Taxȱ Office.ȱ Itȱ isȱ alsoȱ responsibleȱ forȱ ensuringȱ thatȱ externalȱ
stakeholdersȱ understandȱ theȱ ECMPȱ Changeȱ Program,ȱ andȱ leadingȱ wholeȬofȬ
governmentȱ andȱ internationalȱ initiatives,ȱ suchȱ asȱ theȱ standardȱ businessȱ
reportingȱ(seeȱparagraphȱ1.28).ȱ
Office of the Chief Knowledge Officer
1.22 Theȱ Officeȱ ofȱ theȱ Chiefȱ Knowledgeȱ Officeȱ (OCKO)ȱ isȱ responsibleȱ forȱ
developingȱ aȱ visionȱ andȱ strategyȱ forȱ theȱ managementȱ ofȱ informationȱ withinȱ
theȱTaxȱOffice.ȱThisȱincludesȱimprovingȱtheȱTaxȱOffice’sȱcapabilityȱinȱtheȱareaȱ
ofȱinformationȱmanagement.ȱTheȱOCKOȱisȱalsoȱresponsibleȱforȱdevelopingȱtheȱ
TaxȱOffice’sȱstrategicȱintelligenceȱandȱanalyticsȱcapability.ȱȱ
ECMP Change Program and data matching
1.23 Theȱ ECMPȱ willȱ haveȱ anȱ effectȱ onȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ andȱ
analyticȱ activitiesȱ asȱ itȱ involvesȱ developingȱ newȱ identityȱ matchingȱ
functionality,ȱ creatingȱ aȱ singleȱ informationȱ technologyȱ systemȱ thatȱ storesȱ
wholeȬofȬtaxpayerȱ data,ȱ andȱ implementingȱ automatedȱ caseȱ analysisȱ andȱ
selectionȱ processes.ȱ Furthermore,ȱ theȱ achievementȱ ofȱ ECMPȱ Changeȱ Programȱ
objectivesȱ mayȱ beȱ facilitatedȱ byȱ dataȱ matchingȱ andȱ analyticȱ activities.ȱ Theȱ
ECMPȱ Changeȱ Program’sȱ themesȱ include:ȱ treatingȱ taxpayersȱ asȱ individuals;ȱ
helpingȱ taxpayersȱ manageȱ theirȱ taxȱ affairsȱ inȱ theȱ wayȱ thatȱ suitsȱ them;ȱ savingȱ
timeȱ throughȱ onlineȱ interactions;ȱ increasingȱ certaintyȱ forȱ taxpayers;ȱ andȱ
seamlesslyȱintegratingȱtaxȱwithȱeverydayȱbusinessȱactivities.ȱSignificantly,ȱtheȱ
Taxȱ Officeȱ aimsȱ toȱ useȱ technologyȱ toȱ enableȱ itȱ toȱ becomeȱ aȱ moreȱ serviceȱ andȱ
customerȬfocusedȱorganisation.27 ȱTheȱuseȱofȱdataȱoriginallyȱobtainedȱforȱsemiȬ
automatedȱ postȱ assessmentȱ dataȱ matchingȱ toȱ preȬfillȱ taxȱ returnsȱ beforeȱ
completionȱbyȱaȱtaxpayer,ȱisȱoneȱexampleȱofȱhowȱtheȱholisticȱmanagementȱandȱ
coordinationȱ ofȱ dataȱ matchingȱ inȱ theȱ Taxȱ Office,ȱ includingȱ withinȱ theȱ ECMPȱ
Changeȱ Program,ȱ enablesȱ theȱ Taxȱ Officeȱ toȱ realiseȱ theȱ potentialȱ ofȱ itsȱ dataȱ
matchingȱandȱanalyticsȱcapability.ȱ
27
Second Commissioner Greg Farr 5 April 2006. “Making it easier, cheaper and more personalised -
dealing with the Australian Taxation Office”, Government Technology World 2006.

40
Pre-filling tax returns

1.24 TheȱautomaticȱpreȬfillingȱofȱfieldsȱinȱaȱtaxȱreturnȱorȱrecordȱkeepingȱtoolȱ
byȱ aȱ revenueȱ authorityȱ isȱ designedȱ toȱ assistȱ taxpayersȱ meetȱ theirȱ taxȱ
obligations.ȱ Basedȱ onȱ experienceȱ inȱ countriesȱ whereȱ theȱ practiceȱ isȱ advanced,ȱ
preȬfillingȱ ofȱ taxȱ returnsȱ canȱ provideȱ substantialȱ benefitsȱ toȱ theȱ taxpayerȱ andȱ
revenueȱ authority,ȱ includingȱ aȱ reducedȱ complianceȱ burdenȱ forȱ taxpayers,ȱ aȱ
relativelyȱ easyȱ (automated)ȱ processȱ toȱ adviseȱ adjustments,ȱ fewerȱ taxpayerȱ
errors,ȱ simplerȱ andȱ lessȱ costlyȱ administration,ȱ andȱ improvedȱ imageȱ ofȱ theȱ
revenueȱbody. 28ȱ
International experiences
1.25 PreȬfillingȱoriginatedȱinȱDenmarkȱinȱtheȱlateȱ1980sȱandȱspreadȱoverȱtheȱ
followingȱdecadeȱtoȱotherȱNordicȱregionȱcountriesȱ(e.g.ȱSwedenȱandȱFinland). 29 ȱ
Theȱ practiceȱ isȱ nowȱ wellȱ establishedȱ andȱ regardedȱ asȱ highlyȱ successful.ȱ Inȱ
moreȱ recentȱ years,ȱ otherȱ countriesȱ (e.g.ȱ Chile,ȱ France,ȱ andȱ Spain)ȱ haveȱ
proceededȱtoȱadoptȱtheȱpractice.ȱ
1.26 Inȱ theȱ Nordicȱ regionȱ countries,ȱ mostȱ citizensȱ (aroundȱ 18ȱ million)ȱ
receiveȱ aȱ preȬfilledȱ taxȱ returnȱ (onȱ paperȱ and/orȱ viaȱ theȱ Internet).ȱ Givenȱ theȱ
comprehensivenessȱ ofȱ theȱ thirdȱ partyȱ reportingȱ systemsȱ inȱ placeȱ inȱ theseȱ
countries,ȱ revenueȱ bodiesȱ areȱ ableȱ toȱ preȬfillȱ muchȱ ofȱ theȱ taxȱ returnȱ forȱ theȱ
majorityȱ ofȱ taxpayers,ȱ thusȱ substantiallyȱ reducingȱ theirȱ complianceȱ burden.ȱ
Forȱmanyȱtaxpayers,ȱallȱ thatȱisȱrequiredȱisȱthatȱtheyȱexamineȱtheirȱreturnȱandȱ
confirmȱ itsȱ accuracyȱ andȱ completenessȱ withȱ theȱ revenueȱ body.ȱ Theȱ potentialȱ
forȱpreȬfillingȱ variesȱ fromȱ countryȱ toȱ country,ȱ andȱ isȱinfluencedȱbyȱtaxȱ policyȱ
designȱ featuresȱ andȱ otherȱ factorsȱ inȱ eachȱ jurisdiction.ȱ However,ȱ thereȱ areȱ aȱ
numberȱofȱcriticalȱsuccessȱfactorsȱthatȱhaveȱbeenȱidentifiedȱfromȱtheȱexperienceȱ
ofȱNordicȱregionȱcountriesȱthatȱgenerallyȱapplyȱforȱsuccessfulȱpreȬfilling.ȱTheseȱ
includeȱtheȱuseȱofȱhighȱintegrityȱtaxpayerȱidentifiersȱinȱallȱthirdȱpartyȱreports,ȱ
comprehensiveȱ andȱ timelyȱ thirdȱ partyȱ reportingȱ obligationsȱ (e.g.ȱ coveringȱ
majorȱincome,ȱdeduction,ȱandȱassetȬrelatedȱitemsȱofȱinformation)ȱandȱtheȱwideȱ
useȱofȱtechnologyȱbyȱtheȱreportingȱbodies.ȱ
28
The Head of Tax Administration Division, OECD Centre for Tax Policy and Administration, Richard
Highfield, 2006. Pre-populated Income Tax Returns: The Next ’Big Thing’ in Reform of the Administration
of Australia’s Personal Income Tax System? Keynote address to 7th International Tax Administration
Conference, ATAX, University of New South Wales, Australia, 20–21 April 2006.
29
OECD Centre for Tax Policy and Administration, 2006. Using Third Party Information Reports to Assist
Taxpayers Meet their Return Filing Obligations – Country Experiences With the Use of Pre-populated
Personal Tax Returns.

41
Pre-filling of income tax returns for individuals by the Tax Office
1.27 Theȱ Taxȱ Officeȱ beganȱ triallingȱ theȱ preȬfillingȱ ofȱ electronicallyȱ lodgedȱ
(i.e.ȱ eȬtax)ȱ 2004–05ȱ incomeȱ taxȱ returnsȱ forȱ individualsȱ usingȱ Centrelinkȱ
paymentȱ summaryȱ informationȱ andȱ medicalȱ expensesȱ recordedȱ byȱ Medicareȱ
Australia.ȱInȱtheȱBudgetȱSpeechȱ2007–08,ȱtheȱthenȱTreasurerȱannouncedȱtheȱTaxȱ
OfficeȱwouldȱintroduceȱpreȬfillingȱforȱtheȱnineȱmillionȱtaxpayersȱwhoȱcurrentlyȱ
lodgeȱtheirȱtaxȱreturnsȱelectronicallyȱ(eitherȱdirectlyȱorȱthroughȱaȱtaxȱagent). 30 ȱ
PreȬfillingȱ wouldȱ beȱ availableȱ inȱ 2008–09ȱ (forȱ theȱ 2007–08ȱ incomeȱ taxȱ year’sȱ
returns),ȱ andȱ preȬfilledȱ informationȱ wouldȱ includeȱ incomeȱ fromȱ salaryȱ andȱ
wages,ȱ interest,ȱ dividends,ȱ informationȱ onȱ privateȱ healthȱ insurance,ȱ andȱ anyȱ
benefitsȱpaidȱfromȱtheȱGovernment,ȱincludingȱtheȱfamilyȱtaxȱbenefit.ȱTheȱthenȱ
Treasurerȱ statedȱ thatȱ preȬfillingȱ wouldȱ dramaticallyȱ simplifyȱ incomeȱ taxȱ
returns,ȱandȱprovidedȱtheȱTaxȱOfficeȱwithȱanȱadditionalȱ$20ȱmillionȱinȱ2007–08ȱ
forȱitsȱimplementation.ȱPreȬfillingȱisȱexaminedȱinȱChapterȱ3ȱ–ȱDataȱmatchingȱandȱ
analyticsȱcapabilityȱinȱtheȱTaxȱOffice.ȱ
Standard business reporting

1.28 Inȱ Augustȱ 2006,ȱ theȱ thenȱ Treasurerȱ createdȱ aȱ committeeȱ ofȱ Australianȱ
andȱ stateȱ governmentȱ officialsȱ toȱ examineȱ theȱ caseȱ forȱ introducingȱ
standardisedȱ businessȱ reporting.ȱ Standardȱ businessȱ reportingȱ aimsȱ toȱ reduceȱ
theȱ reportingȱ burdenȱ forȱ businessȱ throughȱ eliminatingȱ unnecessaryȱ orȱ
duplicatedȱ reporting,ȱ andȱ improvingȱ theȱ interfaceȱ betweenȱ businessȱ andȱ
government.ȱ Onȱ 30ȱ Augustȱ 2007,ȱ theȱ thenȱ Treasurerȱ announcedȱ thatȱ theȱ
governmentȱwouldȱspendȱ$208ȱmillionȱoverȱtheȱnextȱthreeȱyearsȱimplementingȱ
aȱnewȱmethodȱforȱstandardisedȱbusinessȱreportingȱtoȱgovernment.ȱThisȱprojectȱ
isȱbeingȱcoordinatedȱbyȱtheȱTreasuryȱandȱwillȱfacilitateȱparticipatingȱagenciesȱ
toȱreviewȱandȱstreamlineȱtheirȱrequirementsȱforȱbusinessȱreporting.ȱWhileȱtheȱ
benefitsȱofȱstandardisedȱbusinessȱreportingȱareȱintendedȱtoȱprimarilyȱaccrueȱtoȱ
businesses,ȱ significantȱ benefitsȱ areȱ expectedȱ forȱ governmentȱ agencies,ȱ
includingȱ theȱ Taxȱ Office,ȱ fromȱ increasedȱ dataȱ sharingȱ opportunitiesȱ andȱ
improvedȱdataȱquality.ȱ
Australian Law Reform Commission Review of Privacy

1.29 Inȱ Januaryȱ 2006,ȱ theȱ Australianȱ Lawȱ Reformȱ Commissionȱ (ALRC)ȱ
receivedȱTermsȱofȱReferenceȱfromȱtheȱthenȱAustralianȱAttorneyȬGeneralȱforȱanȱ
inquiryȱintoȱtheȱextentȱtoȱwhichȱtheȱPrivacyȱActȱ1988ȱ(Cwlth)ȱandȱrelatedȱlawsȱ
30
Treasurer of the Commonwealth of Australia, Budget Speech 2007–08, 8 May 2007 on the second
reading of the Appropriation Bill (no. 1) 2007–08, p. 6.

42
continueȱtoȱprovideȱanȱeffectiveȱframeworkȱforȱprotectingȱprivacyȱinȱAustralia.ȱ
Theȱreviewȱwasȱinitiatedȱgiven:ȱ
x theȱ rapidȱ advancesȱ inȱ information,ȱ communications,ȱ storage,ȱ
surveillanceȱandȱotherȱrelevantȱtechnologies;ȱ
x possibleȱchangingȱcommunityȱperceptionsȱofȱprivacyȱandȱtheȱextentȱtoȱ
whichȱitȱshouldȱbeȱprotectedȱbyȱlegislation;ȱ
x theȱexpansionȱofȱstateȱandȱterritoryȱlegislativeȱactivity;ȱandȱ
x emergingȱareasȱthatȱmayȱrequireȱprivacyȱprotection.ȱ
1.30 TheȱALRCȱhasȱproducedȱtwoȱissuesȱpapers,ȱandȱaȱdiscussionȱpaper.ȱAȱ
finalȱ reportȱ isȱ dueȱ toȱ beȱ releasedȱ inȱ earlyȱ 2008.ȱ Anyȱ subsequentȱ changesȱ toȱ
privacyȱlegislationȱmayȱaffectȱtheȱTaxȱOffice’sȱdataȱmatchingȱactivities.ȱ
Anti-Money Laundering and Counter-Terrorism Financing Act 2006

1.31 TheȱAntiȬMoneyȱLaunderingȱandȱCounterȬTerrorismȱFinancingȱ(AML/CTF)ȱ
Actȱ2006ȱreceivedȱRoyalȱAssentȱonȱ12ȱDecemberȱ2006.ȱItȱimposedȱaȱnumberȱofȱ
obligationsȱ onȱ reportingȱ entitiesȱ whenȱ theyȱ provideȱ designatedȱ services.ȱ Onȱ
13ȱJulyȱ 2007,ȱ theȱ AttorneyȬGeneral’sȱ Departmentȱ releasedȱ draftȱ provisionsȱ
settingȱ outȱ designatedȱ servicesȱ thatȱ theȱ furtherȱ amendmentsȱ ofȱ theȱ AML/CTFȱ
Actȱ 2006ȱ willȱ cover.ȱ Theseȱ provisionsȱ areȱ expectedȱ toȱ extendȱ theȱ designatedȱ
servicesȱtoȱincludeȱaȱrangeȱofȱprofessionalȱandȱbusinessȱservices,ȱincludingȱrealȱ
estateȱ services.ȱ Thisȱ mayȱ enableȱ theȱ Taxȱ Officeȱ toȱ utiliseȱ additionalȱ externalȱ
dataȱforȱitsȱdataȱmatchingȱactivities.ȱȱ
Council of Australian Governments

1.32 Theȱ Councilȱ ofȱ Australianȱ Governmentsȱ (COAG)ȱ isȱ theȱ peakȱ
intergovernmentalȱforumȱinȱAustralia.ȱCOAG’sȱroleȱisȱtoȱinitiate,ȱdevelopȱandȱ
monitorȱimplementationȱofȱpolicyȱreformsȱthatȱareȱofȱnationalȱsignificanceȱandȱ
thatȱneedȱcooperativeȱAustralianȱgovernmentȱaction.ȱ
Personal property securities reform
1.33 InȱAprilȱ2007ȱCOAGȱagreed,ȱinȱprinciple,ȱtoȱestablishȱaȱnationalȱsystemȱ
forȱ registeringȱ personalȱ propertyȱ securities. 31 ȱ Theȱ Governmentȱ announcedȱ inȱ
theȱ2007–08ȱFederalȱBudgetȱthatȱitȱwouldȱprovideȱ$113.3ȱmillionȱoverȱfiveȱyearsȱ
(includingȱ$2.1ȱmillionȱinȱ2006–07)ȱtoȱharmoniseȱAustralia’sȱpersonalȱpropertyȱ
31
Personal property is property other than buildings or land (which may include, for example, boats,
vehicles and other valuable consumer goods).

43
securityȱ lawsȱinȱoneȱCommonwealthȱactȱandȱdevelopȱaȱsingleȱnationalȱonlineȱ
registerȱ ofȱ personalȱ propertyȱ securityȱ interests.ȱ Theȱ AttorneyȬGeneral’sȱ
Departmentȱ isȱ responsibleȱ forȱ providingȱ legalȱ andȱ policyȱ adviceȱ acrossȱ
Governmentȱ onȱ personalȱ propertyȱ securitiesȱ andȱ forȱ establishingȱ aȱ nationalȱ
systemȱforȱpersonalȱpropertyȱsecuritiesȱregistration.ȱ
National Identity Security Strategy
1.34 Inȱ Aprilȱ 2007,ȱ underȱ COAGȱ commitment,ȱ theȱ Commonwealth,ȱ stateȱ
andȱ territoryȱ governmentsȱ signedȱ anȱ agreementȱ toȱ implementȱ aȱ Nationalȱ
Identityȱ Securityȱ Strategy.ȱ Theȱ Strategyȱ recognisesȱ thatȱ excess,ȱ redundantȱ orȱ
falseȱrecordsȱinȱagencies’ȱidentityȱregistersȱcanȱundermineȱrevenueȱcollection;ȱ
provisionȱofȱlowȱcostȱservices;ȱandȱobligationsȱunderȱtheȱPrivacyȱActȱtoȱretainȱ
accurateȱ personalȱ details.ȱ Theȱ Taxȱ Office,ȱ inȱ partnershipȱ withȱ theȱ AttorneyȬ
General’sȱ Department,ȱ isȱ conductingȱ theȱ dataȱ matchingȱ pilotȱ toȱ testȱ theȱ
integrityȱofȱaȱsampleȱofȱ25ȱ000ȱrecordsȱfromȱtheȱTaxȱOffice,ȱwithȱtheseȱrecordsȱ
beingȱ matchedȱ withȱ dataȱ heldȱ byȱ Centrelink,ȱ Medicareȱ Australiaȱ andȱ NSWȱ
RegistryȱofȱBirths,ȱDeathsȱandȱMarriages.ȱTheseȱagenciesȱwillȱattemptȱtoȱmatchȱ
TaxȱOfficeȱrecordsȱwithȱinformationȱheldȱwithinȱtheirȱdatabaseȱandȱprovideȱaȱ
ratingȱthatȱrelatesȱtoȱtheȱdegreeȱtoȱwhichȱtheȱrecordȱcouldȱbeȱmatched.ȱTheȱTaxȱ
Officeȱwillȱthenȱcompileȱtheȱresultsȱfromȱallȱthreeȱagencies.ȱTheȱaimȱofȱtheȱPilotȱ
isȱ toȱ identifyȱ keyȱ dataȱ matchingȱ elementsȱ thatȱ canȱ beȱ usedȱ toȱ improveȱ theȱ
accuracyȱ ofȱ personalȱ informationȱ heldȱ onȱ governmentȱ databases.ȱ Dueȱ toȱ
privacyȱ concerns,ȱ theȱ resultsȱ ofȱ theȱ dataȱ matchingȱ processȱ cannotȱ beȱ usedȱ toȱ
undertakeȱadministrativeȱorȱcomplianceȱaction.ȱ
1.35 Aȱ Privacyȱ Impactȱ Assessmentȱ wasȱ developedȱ forȱ thisȱ programȱ andȱ isȱ
availableȱ fromȱ AttorneyȬGeneral’sȱ Department.ȱ Aȱ Gazettalȱ noticeȱ wasȱ
publishedȱinȱMayȱ2007ȱadvisingȱtheȱpublicȱthatȱthisȱpilotȱwasȱtoȱoccur.ȱ
National Information Sharing Strategy and National Address Management
Framework
1.36 Theȱ Onlineȱ andȱ Communicationsȱ Council,ȱ whichȱ operatesȱ withinȱ
COAGȱ protocolsȱ forȱ Ministerialȱ Councils,ȱ isȱ theȱ peakȱ crossȬgovernmentȱ
ministerialȱforumȱtoȱconsiderȱandȱreachȱagreementȱonȱstrategicȱapproachesȱtoȱ
informationȱ andȱ communicationsȱ issuesȱ ofȱ nationalȱ importance.ȱ Theȱ Onlineȱ
andȱ Communicationsȱ Councilȱ agreedȱ toȱ theȱ developmentȱ ofȱ aȱ Nationalȱ
Informationȱ Sharingȱ Strategyȱ thatȱ wouldȱ provideȱ theȱ processesȱ andȱ toolsȱ toȱ
enableȱ jurisdictionsȱ toȱ shareȱ informationȱ whileȱ preservingȱ theirȱ legislativeȱ
obligationsȱ andȱ safeguardingȱ citizens’ȱ privacy.ȱ Itȱ isȱ alsoȱ progressingȱ
developmentȱ ofȱ aȱ Nationalȱ Addressȱ Managementȱ Frameworkȱ thatȱ theȱ

44
Australianȱ Governmentȱ andȱ Stateȱ andȱ Territoryȱ Governmentsȱ willȱ useȱ forȱ
addressȱverificationȱservices. 32 ȱȱ
1.37 Theseȱ developmentsȱ areȱ designedȱ toȱ identifyȱ keyȱ dataȱ matchingȱ
elementsȱ andȱ willȱ improveȱ dataȱ sharingȱ acrossȱ governmentȱ asȱ aȱ whole.ȱ Thisȱ
willȱ affectȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ activitiesȱ asȱ itȱ mayȱ (subjectȱ toȱ aȱ
‘fitnessȱ forȱ purposeȱ analyses’ȱ byȱ theȱ Taxȱ Office)ȱ provideȱ additionalȱ externalȱ
dataȱ sourcesȱ andȱ provideȱ avenuesȱ toȱ improveȱ theȱ integrityȱ andȱ qualityȱ ofȱ itsȱ
internalȱdatabase.ȱȱ
Recent changes in superannuation legislation

1.38 Underȱ theȱ Government’sȱ superannuationȱ simplificationȱ reforms,ȱ fromȱ
1ȱJulyȱ 2007,ȱ thereȱ willȱ beȱ significantȱ changesȱ toȱ theȱ taxȱ treatmentȱ ofȱ
superannuation,ȱinȱtheȱareasȱof:ȱ
x taxȬfreeȱbenefitsȱforȱpeopleȱagedȱ60ȱandȱover;ȱ
x limitsȱonȱconcessionalȱandȱnonȬconcessionalȱcontributionsȱtoȱsuper;ȱ
x taxȱdeductionsȱforȱtheȱselfȱemployed;ȱȱ
x treatmentȱofȱeligibleȱterminationȱpayments;ȱ
x taxȱfileȱnumberȱreportingȱrequirementsȱforȱsuperannuation;ȱandȱ
x unclaimedȱsuperannuationȱreporting.ȱ
1.39 Theȱ Taxȱ Officeȱ isȱ increasingȱ itsȱ effortsȱ toȱ reuniteȱ taxpayersȱ withȱ lostȱ
superannuationȱ funds,ȱ byȱ improvingȱ itsȱ identificationȱ andȱ notificationȱ
processesȱ forȱ theȱ superannuationȱ Lostȱ Membersȱ Register.ȱ Dataȱ matchingȱ isȱ aȱ
criticalȱactivityȱforȱtheȱLostȱMembersȱwork.ȱ
Australian Taxation Revenue Office Coordination Forum

1.40 Theȱ Australianȱ Taxationȱ andȱ Revenueȱ Officesȱ (ATRO)ȱ Coordinationȱ
ForumȱprovidesȱaȱmeansȱtoȱstrengthenȱtheȱrelationshipȱbetweenȱtheȱTaxȱOfficeȱ
andȱstateȱandȱterritoryȱrevenueȱagencies, 33 ȱandȱallowȱforȱjointȱadvancementȱofȱ
mutuallyȱ beneficialȱ projects,ȱ suchȱ asȱ interoperability.ȱ Commencingȱ inȱ Julyȱ
2005,ȱ theȱ Taxȱ Office,ȱ andȱ participatingȱ stateȱ andȱ territoryȱ revenueȱ officesȱ
signedȱ aȱ Serviceȱ Levelȱ Agreementȱ andȱ aȱ Memorandumȱ ofȱ Understandingȱ forȱ
32
Online and Communications Council, Fourteenth Communiqué, 27 June 2007.
33
They include the ACT Revenue Office, the NSW Office of State Revenue, the NT Revenue
Management, the Queensland Office of State Revenue, the Revenue SA, the Tasmanian State Revenue
Office, the Victorian State Revenue Office, and the Western Australia Office of State Revenue.

45
theȱ Exchangeȱ ofȱ Confidentialȱ Informationȱ andȱ Otherȱ Aspectsȱ ofȱ Cooperation.ȱ
Asȱaȱresult,ȱtheȱTaxȱOfficeȱhasȱimprovedȱitsȱprocessesȱforȱacquiringȱlandȱtitlesȱ
dataȱ fromȱ theȱ stateȱ andȱ territoryȱ revenueȱ officesȱ forȱ itsȱ capitalȱ gainsȱ taxȱ
activities,ȱincludingȱforȱtheȱTaxȱOffice’sȱdataȱmatchingȱprojects. 34ȱ
Audit overview
1.41 InȱaȱselfȬassessmentȱsystemȱtheȱTaxȱOfficeȱseeksȱtoȱachieveȱhighȱlevelsȱ
ofȱ complianceȱ byȱ usingȱ theȱ Complianceȱ Model 35 ȱ ofȱ behaviourȱ toȱ guideȱ theȱ
applicationȱ ofȱ riskȱ mitigationȱ strategies.ȱ Theseȱ strategiesȱ rangeȱ fromȱ theȱ
communicationȱ ofȱ informationȱ toȱ helpȱ taxpayersȱ fulfilȱ theirȱ obligationsȱ toȱ
criminalȱprosecutionȱtoȱstopȱandȱdeterȱegregiousȱnonȬcompliance.ȱInȱtermsȱofȱ
resourceȱinvestments,ȱauditsȱhaveȱtraditionallyȱconstitutedȱtheȱprimaryȱformȱofȱ
verificationȱ adoptedȱ byȱ revenueȱ bodies,ȱ includingȱ theȱ Taxȱ Office,ȱ toȱ checkȱ
taxpayers’ȱ complianceȱ withȱ theirȱ obligations.ȱ However,ȱ thereȱ areȱ practicalȱ
limitationsȱ regardingȱ theȱ levelȱ ofȱ taxpayerȱ andȱ incomeȱ coverageȱ achievableȱ
fromȱauditȱactivities.ȱȱ
1.42 Sinceȱ theȱ 1970sȱ theȱ Taxȱ Officeȱ hasȱ beenȱ developingȱ aȱ computerȬbasedȱ
dataȱ matchingȱ capabilityȱ whichȱ isȱ deployedȱ toȱ assistȱ theȱ mitigationȱ ofȱ risksȱ
associatedȱ withȱ theȱ managementȱ ofȱ taxpayerȱ compliance.ȱ Traditionalȱ
semiȬautomatedȱdataȱmatchingȱvalidatesȱtheȱincomeȱreportedȱbyȱtaxpayersȱinȱ
theirȱreturnsȱandȱdisclosesȱincomeȱthatȱhadȱnotȱbeenȱreportedȱtoȱtheȱTaxȱOffice.ȱ
Inȱmanyȱcasesȱitȱgeneratesȱautomaticȱcorrespondenceȱtoȱtaxȱpayers.ȱItȱcanȱalsoȱ
bringȱtoȱnoticeȱdiscrepanciesȱinȱtheȱinformationȱprovidedȱbyȱtaxpayersȱinȱtheirȱ
taxȱreturnsȱandȱauthoritativeȱrelevantȱthirdȱpartyȱdata.ȱAsȱnotedȱinȱChapterȱ3ȱ–ȱ
dataȱ matchingȱ andȱ analyticsȱ capabilityȱ inȱ theȱ Taxȱ Office,ȱ itsȱ potentialȱ toȱ supportȱ
taxpayerȱ serviceȱ needsȱ (andȱ toȱ significantlyȱ reduceȱ taxpayers’ȱ complianceȱ
burden)ȱisȱonlyȱnowȱstartingȱtoȱbeȱaddressedȱinȱaȱsubstantialȱway.ȱȱ
1.43 Theȱ spreadȱ andȱ powerȱ ofȱ ITȱ systemsȱ usedȱ byȱ businessȱ andȱ
Government,ȱ inȱ conjunctionȱ withȱ moreȱ secureȱ facilitiesȱ onȱ theȱ Worldȱ Wideȱ
34
The State Revenue Offices have agreed to provide property data to the Tax Office every six months. See
ANAO Audit Report No.16 1006–07 Administration of Capital Gains Tax Compliance in the Individuals
Market Segment.
35
ATO April 1998.

46
Web,ȱprovidesȱsignificantlyȱincreasedȱcapacityȱforȱtimelyȱelectronicȱexchangesȱ
ofȱ dataȱ andȱ opportunitiesȱ forȱ newȱ andȱ improvedȱ servicesȱ toȱ taxȱ payers.ȱ Thisȱ
expandingȱuseȱofȱhighȱqualityȱdata,ȱespeciallyȱforȱtheȱprovisionȱofȱwebȬbasedȱ
servicesȱ atȱ theȱ timeȱ taxpayersȱ completeȱ theirȱ taxȱ returns,ȱ representsȱ aȱ newȱ
paradigmȱinȱtaxȱadministration.ȱȱ
Audit objective and scope

1.44 Theȱ objectiveȱ ofȱ theȱ auditȱ wasȱ toȱ evaluateȱ theȱ Taxȱ Officeȇsȱ corporateȱ
managementȱofȱdataȱmatching,ȱincludingȱanalytics.ȱȱ
1.45 Theȱ ANAOȱ examinedȱ theȱ Taxȱ Office’sȱ strategicȱ goalsȱ andȱ governanceȱ
arrangementsȱ forȱ dataȱ matchingȱ andȱ analytics,ȱ itsȱ complianceȱ withȱ privacyȱ
requirementsȱandȱwhetherȱtheȱTaxȱOfficeȱisȱachievingȱintendedȱresults,ȱwhichȱ
includeȱ revenueȱ collection,ȱ optimisedȱ complianceȱ andȱ provisionȱ ofȱ improvedȱ
servicesȱtoȱtaxpayers.ȱ
1.46 Taxȱ Officeȱ executivesȱ haveȱ beenȱ increasinglyȱ drawingȱ onȱ theȱ
andȱ analyticsȱ activity. 36 ȱ Accordingly,ȱ theȱ auditȱ includedȱ theseȱ relationshipsȱ
andȱ conceptualȱ commonalitiesȱ withinȱ theȱ scopeȱ ofȱ theȱ audit.ȱ Theȱ auditȱ wasȱ
guided,ȱtherefore,ȱbyȱaȱbroaderȱdefinitionȱofȱ‘dataȱmatching’:ȱmeaningȱ‘findingȱ
relationshipsȱ andȱ patternsȱ inȱ largeȱ volumesȱ ofȱ data’.ȱ Thisȱ includesȱ theȱ moreȱ
traditionalȱ ideaȱ ofȱ dataȱ matchingȱ asȱ ‘bringingȱ togetherȱ dataȱ fromȱ differentȱ
sourcesȱandȱcomparingȱit’.ȱȱ
1.47 Atȱ theȱ conceptualȱ levelȱ ofȱ thisȱ broaderȱ definition,ȱ traditionalȱ semiȬ
automatedȱ Taxȱ Officeȱ dataȱ matchingȱ isȱ increasinglyȱ becomingȱ anȱ integratedȱ
elementȱ withinȱ Taxȱ Office’sȱ moreȱ recentlyȱ initiatedȱ analyticsȱ work.ȱ
Accordingly,ȱinȱthisȱreport,ȱtheȱphraseȱ‘dataȱmatchingȱandȱanalyticsȱcapability’ȱ
includesȱ allȱ theȱ computerȬbasedȱ methodologiesȱ thatȱ theȱ Taxȱ Officeȱ appliesȱ toȱ
bringȱ togetherȱ largeȱ volumesȱ ofȱ dataȱ fromȱ differentȱ sources,ȱ makingȱ
comparisons,ȱ linkingȱ dataȱ sets,ȱ comparingȱ correspondingȱ items,ȱ findingȱ
36
Variety, Australian Tax Teachers’ Association Conference, University of Queensland 22-24 January
2007.

47
relationshipsȱ andȱ patternsȱ andȱ constructingȱ descriptiveȱ orȱ hypotheticalȱ
representationalȱand/orȱfunctionalȱrelationships.ȱȱ
1.48 Theȱ auditȱ focussedȱ onȱ theȱ conductȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ
projectsȱ byȱ Taxȱ Officeȱ businessȱ lines,ȱ theȱ significantȱ synergiesȱ andȱ
interrelationshipsȱ betweenȱ theseȱ projectsȱ andȱ otherȱ Taxȱ Officeȱ activities,ȱ suchȱ
asȱidentityȱmatching,ȱATOmsȱandȱanalyticsȱprojects.ȱȱ
1.49 Theȱ auditȱ didȱ notȱ coverȱ wholeȬofȬgovernmentȱ dataȱ matchingȱ issues,ȱ
suchȱ asȱ theȱ Taxȱ Office’sȱ relationshipsȱ withȱ externalȱ governmentȱ agencies,ȱ orȱ
implicationsȱofȱtheȱthenȱproposedȱAccessȱCard.ȱ
Audit methodology
1.50 Theȱ ANAOȱ conductedȱ fieldworkȱ inȱ theȱ Taxȱ Office’sȱ Canberra,ȱ
Melbourne,ȱ Sydneyȱ andȱ Brisbaneȱ officesȱ betweenȱ Marchȱ andȱ Juneȱ 2007.ȱ Thisȱ
includedȱ examinationȱ ofȱ relevantȱ Taxȱ Officeȱ documentationȱ andȱ interviewsȱ
withȱ staffȱ fromȱ theȱ Operations,ȱ Largeȱ Businessȱ andȱ International,ȱ Microȱ
EnterprisesȱandȱIndividuals,ȱSuperannuation,ȱSeriousȱNonȱCompliance,ȱExcise,ȱ
andȱGoodsȱandȱServicesȱTaxȱbusinessȱlines.ȱȱ
1.51 TheȱANAOȱsoughtȱfeedbackȱfromȱexternalȱstakeholders,ȱincluding:ȱ
x theȱ Officeȱ ofȱ theȱ Privacyȱ Commissionerȱ –ȱ onȱ theȱ Taxȱ Office’sȱ
complianceȱ withȱ theȱ privacyȱ requirementsȱ asȱ statedȱ inȱ theȱ federalȱ
Privacyȱ Actȱ 1988,ȱ theȱ DataȬmatchingȱ Programȱ (Assistanceȱ andȱ Tax)ȱ Actȱ
1990ȱ andȱ theȱ advisoryȱ Guidelinesȱ forȱ theȱ Useȱ ofȱ DataȬMatchingȱ inȱ
CommonwealthȱAdministration;ȱȱ
x Treasuryȱ–ȱonȱtheȱstandardȱbusinessȱreportingȱproject;ȱandȱ
x Geoscienceȱ Australiaȱ –ȱ onȱ COAGȱ initiatives,ȱ suchȱ asȱ interoperabilityȱ
andȱtheȱnationalȱaddressȱmanagementȱframework.ȱ
1.52 Theȱ ANAOȱ engagedȱ anȱ externalȱ advisoryȱ panelȱ toȱ provideȱ expertȱ
commentȱonȱtheȱauditȱscope,ȱprocesses,ȱandȱreporting.ȱȱ
1.53 Thisȱ auditȱ wasȱ undertakenȱ inȱ conformanceȱ withȱ ANAOȱ auditingȱ
standardsȱandȱcostȱ$512ȱ976.ȱ
Acknowledgements
1.54 Theȱ ANAOȱ wouldȱ likeȱ toȱ thankȱ Taxȱ Officeȱ managementȱ andȱ staffȱ forȱ
theirȱ assistanceȱ inȱ theȱ conductȱ ofȱ theȱ audit.ȱ Inȱ particular,ȱ weȱ wouldȱ likeȱ toȱ

48
thankȱ ourȱ liaisonȱ officersȱ forȱ theirȱ considerableȱ time,ȱ effortȱ andȱ expertiseȱ
contributedȱduringȱtheȱaudit.ȱȱ
1.55 TheȱANAOȱwouldȱalsoȱlikeȱtoȱexpressȱappreciationȱtoȱtheȱstakeholdersȱ
consultedȱforȱtheirȱcontributionȱtoȱtheȱaudit.ȱ

49
2. Legislative and Policy Framework
ThisȱchapterȱidentifiesȱtheȱkeyȱfeaturesȱofȱtheȱlegislativeȱframeworkȱforȱtheȱTaxȱOffice’sȱ
dataȱ matchingȱ activities,ȱ andȱ reviewsȱ theȱ Taxȱ Office’sȱ adherenceȱ withȱ privacyȱ
legislation.ȱ
Authority for data matching

Tax Office’s legislative authority for acquiring data
2.1 PriorȱANAOȱreportsȱthatȱexaminedȱtheȱtaxȱfileȱnumberȱsystemȱprovideȱ
detailsȱ ofȱ theȱ legislativeȱ andȱ policyȱ frameworkȱ thatȱ regulatesȱ Taxȱ Officeȱ dataȱ
matchingȱ andȱ relatedȱ activities. 37 ȱ Taxȱ legislationȱ placesȱ responsibilityȱ onȱ
and/orȱoffsetsȱ toȱwhichȱ theyȱ areȱentitledȱ inȱ derivingȱtheirȱ income.ȱAȱ rangeȱ ofȱ
economicȱ transferȱ paymentsȱ areȱ alsoȱ providedȱ toȱ taxpayersȱ throughȱ theȱ
taxationȱ system. 38 ȱ Individualȱ andȱ businessȱ taxpayersȱ provideȱ informationȱ
directlyȱ toȱ theȱ Taxȱ Officeȱ (e.g.ȱ throughȱ anȱ incomeȱ taxȱ returnȱ orȱ aȱ businessȱ
activityȱstatement),ȱandȱthisȱinformationȱisȱstoredȱinȱtheȱTaxȱOffice’sȱdatabases.ȱ
Taxȱreturnsȱandȱactivityȱstatementsȱprovideȱtheȱessentialȱcoreȱdataȱconcerningȱ
theȱassessmentȱofȱtaxpayersȇȱtaxableȱincome.ȱTheȱTaxȱOfficeȱaimsȱtoȱverifyȱthisȱ
coreȱdataȱusing,ȱamongȱotherȱtechniques,ȱvariousȱdataȱmatchingȱactivities.ȱThisȱ
occursȱonȱanȱannualȱfinancialȱyearȱcycle.ȱ
2.2 Datasetsȱ regularlyȱ providedȱ directlyȱ toȱ theȱ Taxȱ Office,ȱ andȱ theȱ
legislationȱunderȱwhichȱtheȱdataȱisȱprovided,ȱareȱlistedȱinȱAppendixȱ2,ȱTableȱ1.ȱ
Onȱ receiptȱ ofȱ informationȱ fromȱ taxpayers,ȱ theȱ Taxȱ Officeȱ verifiesȱ theȱ
information,ȱandȱidentifiesȱdiscrepancies,ȱanomaliesȱandȱindicatorsȱofȱrisk.ȱTheȱ
TaxȱOfficeȱdoesȱthisȱbyȱmatchingȱnewȱinformationȱagainstȱpreviouslyȱverifiedȱ
(andȱthereforeȱhighȱintegrity)ȱTaxȱOfficeȱandȱexternalȱdata.ȱȱ
2.3 Theȱ externalȱ dataȱ theȱ Taxȱ Officeȱ usesȱ forȱ dataȱ matchingȱ (andȱ otherȱ
activities)ȱisȱacquiredȱviaȱfourȱmainȱavenues,ȱnamely:ȱ
x Datasetsȱ anȱ externalȱ partyȱ providesȱ toȱ theȱ Taxȱ Office,ȱ asȱ aȱ resultȱ ofȱ
specificȱ legislatedȱ requirementsȱ (e.g.ȱ Annualȱ Investmentȱ Incomeȱ
37
Audit Report No.47 2004–05, Australian Taxation Office Tax File Number Integrity and Audit Report
No.37 1998–99, Management of Tax File Numbers.
38
These include grants, benefits, tax offsets and redistribution programs.

50
Legislative and Policy Framework
Reportsȱ (AIIR)ȱ providedȱ byȱ financialȱ institutions). 39 ȱ Theseȱ legislatedȱ

dataȱ setsȱ coverȱ majorȱ incomeȱ streamsȱ suchȱ asȱ salaryȱ andȱ wagesȱ andȱ
interestȱandȱdividends,ȱbutȱdoȱnotȱcoverȱotherȱincomeȱstreamsȱsuchȱasȱ
capitalȱ gains,ȱ netȱ rents,ȱ andȱ incomeȱ fromȱ selfȱ employment.ȱ Seeȱ
Appendixȱ 2,ȱ Tableȱ 2ȱ forȱ aȱ listȱ ofȱ legislatedȱ datasetsȱ theȱ Taxȱ Officeȱ
regularlyȱ receives,ȱ andȱ theȱ legislationȱ underȱ whichȱ theȱ dataȱ isȱ
provided.ȱȱ
x Datasetsȱ aȱ Governmentȱ Agencyȱ providesȱ toȱ theȱ Taxȱ Office,ȱ underȱ aȱ
memorandumȱ ofȱ understandingȱ (e.g.ȱ Stateȱ Revenueȱ Offices).ȱ Theȱ
datasetsȱ theȱ Taxȱ Officeȱ regularlyȱ receivesȱ underȱ memorandaȱ ofȱ
understandingȱareȱlistedȱinȱAppendixȱ2,ȱTableȱ3.ȱ
x CommerciallyȱavailableȱdatasetsȱtheȱTaxȱOfficeȱpurchasesȱ(e.g.ȱelectoralȱ
rollȱdata).ȱTheȱdatasetsȱtheȱTaxȱOfficeȱpurchasesȱareȱlistedȱinȱAppendixȱ
2,ȱTableȱ4ȱand;ȱ
x Datasetsȱ theȱ Taxȱ Officeȱ requisitions,ȱ onȱ aȱ nonȬroutineȱ basis,ȱ forȱ dataȱ
matchingȱ projectsȱ (e.g.ȱ dataȱ isȱ requisitionedȱ fromȱ sellersȱ ofȱ luxuryȱ
vehiclesȱ toȱ addressȱ undeclaredȱ incomeȱ andȱ otherȱ taxȱ risks).ȱ Furtherȱ
examplesȱ ofȱ specificȱ datasetsȱ theȱ Taxȱ Officeȱ acquires,ȱ andȱ theȱ
Commissionerȱ ofȱ Taxation’sȱ legislatedȱ accessȱ andȱ informationȱ
gatheringȱ powersȱ thatȱ provideȱ theȱ authorityȱ forȱ thisȱ dataȱ acquisitionȱ
areȱlistedȱinȱAppendixȱ2,ȱTableȱ5.ȱ
2.4 TheȱTaxȱOffice’sȱlegislativeȱauthorityȱessentiallyȱderivesȱfromȱtwoȱareasȱ
ofȱtheȱlaw:ȱȱ
x specificȱ provisionsȱ inȱ legislationȱ requiringȱ annualȱ reportingȱ ofȱ certainȱ
incomesȱ(e.g.ȱwages,ȱinterest,ȱdividends); 40 ȱandȱ
x theȱTaxȱCommissioner’sȱinformationȱgatheringȱpowers.ȱȱ
2.5 Memorandaȱofȱ Understandingȱcoveringȱtheȱacquisitionȱ ofȱ data,ȱ whereȱ
prepared,ȱ areȱ madeȱ underȱ theȱ legalȱ authorityȱ ofȱ theȱ Commissioner’sȱ powers.ȱ
Conversely,ȱsomeȱexternalȱdataȱsetsȱareȱacquiredȱonȱaȱnormalȱcommercialȱbasisȱ
withoutȱregardȱtoȱanyȱlegislativeȱauthority.ȱ
39
See Audit Report No.48 2003–04, The Australian Taxation Office’s Management and Use of Annual
Investment Income Reports.
40
In this Report, data provided to the Tax Office because of these provisions is referred to as legislated
data.

51
Data matching projects – external data requisitioned using
legislated access and information gathering powers
2.6 Inȱtheȱpast,ȱtheȱTaxȱOfficeȱusedȱdifferentȱapproachesȱtoȱdecideȱwhichȱofȱ
theȱ Commissionerȱ ofȱ Taxation’sȱ powersȱ wereȱ toȱ beȱ usedȱ inȱ procuringȱ data.ȱ
Someȱprojectsȱusedȱaȱspecificȱlegislativeȱauthority,ȱlistedȱaȱnarrowȱuseȱforȱtheȱ
data,ȱ andȱ onlyȱ obtainedȱ dataȱ fieldsȱ relevantȱ toȱ theirȱ projectsȱ soȱ asȱ notȱ toȱ beȱ
seenȱ toȱ beȱ ‘fishing’ȱ forȱ dataȱ orȱ imposeȱ additionalȱ burdenȱ onȱ dataȱ providers.ȱ
ThisȱapproachȱlimitedȱtheȱabilityȱofȱotherȱareasȱwithinȱtheȱTaxȱOfficeȱtoȱuseȱtheȱ
dataȱ obtained.ȱ Itȱ mayȱ haveȱ necessitatedȱ aȱ secondȱ approachȱ toȱ theȱ providerȱ ifȱ
theȱ dataȱ wasȱ alsoȱ neededȱ byȱ otherȱ areas.ȱ Otherȱ projectsȱ deliberatelyȱ soughtȱ
accessȱ underȱ allȱ ofȱ theȱ Taxationȱ Commissionersȱ powers,ȱ andȱ listedȱȱ
broadlyȬdefinedȱcriteriaȱforȱuseȱofȱtheȱdata,ȱinȱorderȱtoȱmaximiseȱtheȱabilityȱofȱ
otherȱ areasȱ toȱ useȱ theȱ dataȱ forȱ taxȱ administration.ȱ Enhancedȱ consultationȱ
betweenȱ allȱ relevantȱ businessȱ linesȱ andȱ theȱ Chiefȱ Knowledgeȱ Officerȱ (CKO)ȱ
duringȱ theȱ projectȱ planningȱ stageȱ wouldȱ couldȱ helpȱ makeȱ sureȱ thatȱ dataȱ areȱ
acquiredȱunderȱtheȱappropriateȱlegislativeȱauthority,ȱpotentiallyȱminimiseȱtheȱ
complianceȱburdenȱonȱdataȱproviders,ȱandȱwouldȱenableȱoptimalȱtheȱuseȱofȱtheȱ
dataȱbyȱtheȱTaxȱOffice.ȱ
Compliance with privacy requirements

2.7 TheȱOfficeȱofȱtheȱPrivacyȱCommissionerȱisȱanȱindependentȱOfficeȱwhichȱ
hasȱ responsibilitiesȱ underȱ theȱ federalȱ Privacyȱ Actȱ 1988ȱ (Cth)ȱ toȱ promoteȱ anȱ
Australianȱcultureȱthatȱrespectsȱprivacy.ȱTheȱPrivacyȱCommissionerȱnotesȱthatȱ
dataȬmatchingȱposesȱaȱparticularȱthreatȱtoȱpersonalȱprivacyȱbecauseȱitȱinvolvesȱ
analysingȱinformationȱ aboutȱ largeȱ numbersȱ ofȱ peopleȱwithoutȱpriorȱ causeȱ forȱ
suspicion.ȱ
Using data matching in Commonwealth administration

2.8 TheȱOfficeȱofȱtheȱPrivacyȱCommissionerȱpublishedȱaȱbooklet,ȱTheȱUseȱofȱ
Dataȱ Matchingȱ inȱ Commonwealthȱ Administrationȱ –ȱ Guidelinesȱ (theȱ Guidelines),ȱ
whichȱcontainsȱaȱnumberȱofȱproceduresȱtoȱensureȱdataȱmatchingȱactivitiesȱareȱ
designedȱ andȱ conductedȱ inȱ accordanceȱ withȱ soundȱ privacyȱ principles.ȱ Theȱ
Guidelinesȱ areȱ notȱ legallyȱ binding;ȱ howeverȱ theȱ Taxȱ Officeȱ hasȱ voluntarilyȱ
undertakenȱtoȱensureȱallȱdataȱmatchingȱprojectsȱthatȱprocureȱthirdȱpartyȱdataȱ
complyȱwithȱtheȱGuidelines.ȱTheȱTaxȱOfficeȱalsoȱendeavoursȱtoȱmakeȱsureȱthatȱ
dataȱmatchingȱusingȱdataȱobtainedȱthroughȱaȱmemorandumȱofȱunderstandingȱ
compliesȱ withȱ theȱ Guidelines.ȱ However,ȱ anyȱ dataȱ matchingȱ theȱ Taxȱ Officeȱ
conductsȱusingȱlegislatedȱdataȱfallsȱoutsideȱtheȱscopeȱofȱtheȱGuidelines.ȱ

52
Protocols, gazette announcements and evaluations

2.9 Theȱ Taxȱ Officeȱ has,ȱ asȱ requiredȱ byȱ theȱ Guidelines,ȱ submittedȱ toȱ theȱ
Privacyȱ Commissionerȱ Dataȱ Matchingȱ Programȱ Protocolsȱ forȱ itsȱ dataȱ matchingȱ
projects,ȱannouncedȱitsȱintentionȱtoȱconductȱauthorisedȱdataȱmatchingȱprojectsȱ
throughȱtheȱCommonwealthȱGazette,ȱandȱsubmittedȱprojectȱevaluationsȱtoȱtheȱ
Privacyȱ Commissioner.ȱ Detailsȱ ofȱ theȱ Taxȱ Office’sȱ submissionsȱ toȱ theȱ Privacyȱ
Commissioner,ȱ andȱ announcementsȱ inȱ theȱ Commonwealthȱ Gazetteȱ sinceȱ
inceptionȱofȱtheȱDMSCȱinȱ2003–04,ȱareȱlistedȱinȱTableȱ2.1.ȱTheȱANAOȱnotesȱthatȱ
asȱ complianceȱ withȱ theȱ Guidelinesȱ isȱ voluntary,ȱ theȱ Privacyȱ Commissionȱ
reviewsȱtheȱTaxȱOffice’sȱsubmissions,ȱprovidingȱtheȱTaxȱOfficeȱwithȱcomment,ȱ
notȱapproval.ȱ
Table 2.1
Tax Office submissions to the Privacy Commissioner, 2003–04 to
2006–07
Tax Office data matching
2002–03 2003–04 2004–05 2005–06 2006–07
projects
Data matching privacy protocols
submitted to the Privacy

Commissioner
1 12 9 10 12
reviewed by the Privacy

Commissioner
1 12 9 10 12
Notices of intention to conduct data

matching published in the 1 12 9 10 13
Commonwealth Gazette Notices
Requests for exemptions from data
matching privacy protocols
Commissioner
0 0 1 0 4
reviewed by the Privacy

Commissioner
0 0 1 0 4
Evaluations of data matching

projects
required to be submitted to the
Privacy Commissioner
1 13 0 0 0

Commissioner
1 12 0 0 0
Source: Tax Office
2.10 TheȱTaxȱ Officeȱ alsoȱ announcesȱ dataȱ matchingȱactivitiesȱ onȱ itsȱ website.ȱ
Asȱ theȱ Taxȱ Officeȱ isȱ usingȱ dataȱ matchingȱ toȱ improveȱ voluntaryȱ compliance,ȱ
communityȱawarenessȱofȱdataȱmatchingȱcouldȱbeȱbeneficialȱtoȱtheȱachievementȱ
ofȱthisȱobjective.ȱTheȱANAOȱconsideredȱthatȱtheȱTaxȱOfficeȱshouldȱbroadenȱitsȱ
53
dataȱmatchingȱannouncementȱbyȱdirectlyȱadvisingȱtaxȱagents 41 ȱofȱgazettedȱdataȱ
matchingȱ projectsȱ asȱ wellȱ asȱ communicatingȱ theseȱ projectsȱ throughȱ theȱ Taxȱ
Office’sȱmarketingȱandȱeducationȱinitiatives.ȱ
Security
2.11 Theȱ Guidelinesȱ alsoȱ requireȱ theȱ Taxȱ Officeȱ toȱ takeȱ precautionsȱ toȱ
protectȱ taxpayers’ȱ information,ȱ includingȱ theȱ secureȱ storageȱ andȱ properȱ
disposalȱofȱinformation.ȱTaxȱOfficeȱemployeesȱmustȱalsoȱcomplyȱwithȱPracticeȱ
StatementȱCMȱ2004/07,ȱSecrecyȱandȱPrivacyȱObligationsȱforȱTaxȱOfficeȱEmployees,ȱ
whenȱ undertakingȱ dataȱ matchingȱ activities.ȱ Internalȱ Taxȱ Officeȱ reportsȱ
identifiedȱscopeȱforȱimprovementȱinȱtheȱTaxȱOffice’sȱcomplianceȱwithȱsecurityȱ
requirements,ȱ includingȱ managementȱ ofȱ updatingȱ andȱ destroyingȱ externalȱ
dataȱ storedȱ onȱ theȱ dataȱ warehouse.ȱ Theȱ Taxȱ Officeȱ subsequentlyȱ initiatedȱ aȱ
rangeȱ ofȱ administrativeȱ reformsȱ toȱ improveȱ managementȱ ofȱ theȱ dataȱ
warehouse.ȱThisȱincludedȱplacingȱtheȱdataȱwarehouseȱunderȱCKOȱsupervision;ȱ
establishingȱ improvedȱ reportingȱ processesȱ forȱ validatingȱ movementȱ of,ȱ andȱ
accessȱ to,ȱ thirdȱ partyȱ dataȱ onȱ theȱ dataȱ warehouse;ȱ andȱ reorganisingȱ
administrationȱ ofȱ theȱ dataȱ warehouseȱ byȱ theȱ CKO.ȱ Theȱ Taxȱ Officeȱ advisedȱ itȱ
hasȱ alsoȱ commencedȱ aȱ Dataȱ Stewards’ȱ Programȱ toȱ provideȱ improvedȱ
managementȱ ofȱ theȱ Taxȱ Office’sȱ Dataȱ assets,ȱ whichȱ theȱ ANAOȱ understandsȱ
includesȱsecurityȱofȱexternalȱdataȱusedȱinȱdataȱmatching.ȱ
Update of the Guidelines
2.12 Asȱ theȱ Guidelinesȱ wereȱ developedȱ inȱ 1998,ȱ thereȱ areȱ aȱ numberȱ ofȱ
factorsȱ thatȱ haveȱ aȱ bearingȱ onȱ theirȱ applicabilityȱ toȱ contemporaryȱ dataȱ
matchingȱpracticesȱinȱtheȱTaxȱOffice 42 ,ȱnamely:ȱ
x rapidȱadvancesȱinȱtechnology:ȱ
increasingȱ useȱ ofȱ webȬbasedȱ systemsȱ forȱ taxationȱ
administration,ȱincludingȱtheȱTaxȱAgentȱPortal,ȱBusinessȱPortal,ȱ
andȱeȬtax;ȱȱ
anȱ increasingȱ capacityȱ forȱ theȱ Taxȱ Officeȱ toȱ adoptȱ aȱ moreȱ
comprehensiveȱandȱholisticȱapproachȱinȱaddressingȱcomplianceȱ
risks;ȱ
41
Tax agents prepare about 73 per cent of individual, and over 95 per cent of business tax returns.
42
The ANAO notes that the ALRC is currently inquiring into the extent to which the Privacy Act 1988
(Cwth) and related laws continue to provide an effective framework for protecting privacy in Australia.
The Attorney-General initiated this review due to rapid advances in technology, changing community
perceptions, expanded government activity, and emerging areas that may require privacy protection.

54
x changingȱcommunityȱperceptions:ȱ
greaterȱ communityȱ acknowledgementȱ thatȱ dataȱ matchingȱ isȱ anȱ
efficientȱ wayȱ toȱ improveȱ taxȱ compliance,ȱ especiallyȱ ifȱ itȱ isȱ
addressingȱaȱcomplexȱriskȱorȱanȱareaȱofȱnonȬcompliance;ȱȱ
heightenedȱcommunityȱconcernsȱaboutȱidentityȱfraudȱandȱtheft;ȱ
x expansionȱofȱdataȱmatchingȱactivity:ȱ
theȱ Taxȱ Officeȱ conductsȱ theȱ mostȱ dataȱ matchingȱ programsȱ ofȱ
anyȱCommonwealthȱagencyȱ(seeȱFigureȱ2.1);ȱ
anȱincreasingȱneedȱforȱtheȱTaxȱOfficeȱtoȱretainȱandȱuseȱhistoricalȱ
dataȱ forȱ taxȱ administrationȱ purposesȱ andȱ toȱ useȱ dataȱ forȱ aȱ
multiplicityȱofȱdataȱmatchingȱprojects; 43 ȱandȱ
anȱ increasedȱ roleȱ inȱ taxȱ administrationȱ ofȱ dataȱ mining,ȱ
mapping,ȱmodellingȱandȱanalyticsȱactivities.ȱ
Figure 2.1
Tax Office and federal government agency submissions to the Privacy
Commissioner, 2003–04 to 2006–07
20
No. of Protocols Approved
18
16
14
12
Other Agencies
10
8 Tax Office
6
4
2
0
2003-04 2004-05 2005-06 2006-07
Year
ȱ
Source: ANAO analysis of Privacy Commissioner Annual Reports
43
For example, the Tax Office has sought exemptions from the normal 90 day time limit for the destruction
of data, to enable data matching project leaders to retain data for the life of projects. In particular,
property data required for undertaking Capital Gains Tax compliance activities requires an extended
timeframe, in order to undertake business-as-usual compliance activities, and prevent repeated requests
for data from providers.

55
2.13 TheseȱdevelopmentsȱindicateȱthatȱtheȱGuidelinesȱissuesȱbyȱtheȱOfficeȱofȱ
theȱPrivacyȱCommissioner,ȱtoȱguideȱdataȱmatchingȱinȱAustralianȱGovernmentȱ
agencies,ȱwouldȱ benefitȱfromȱ aȱreviewȱ andȱ subsequentȱ update.ȱ Sinceȱ 2004–05ȱ
theȱTaxȱOfficeȱhasȱmadeȱfiveȱsuccessfulȱrequestsȱtoȱtheȱPrivacyȱCommissionerȱ
toȱ obtainȱ exemptionsȱ fromȱ theȱ Guidelinesȱ andȱ toȱ retainȱ dataȱ forȱ extendedȱ
periods.ȱTheȱTaxȱOfficeȱcontinuesȱtoȱcomplyȱwithȱtheȱGuidelines.ȱȱ
2.14 Inȱviewȱofȱtheȱforegoingȱconsiderationsȱandȱdevelopments,ȱtheȱANAOȱ
raisedȱwithȱtheȱTaxȱOfficeȱandȱtheȱOfficeȱofȱtheȱPrivacyȱCommissionerȱtheȱneedȱ
toȱ reviewȱ theȱ suitabilityȱ ofȱ theȱ Guidelines,ȱ withȱ aȱ viewȱ toȱ draftingȱ revisedȱ
guidelines,ȱ consistentȱ withȱ privacyȱ principles,ȱ whichȱ areȱ moreȱ relevantȱ toȱ
contemporaryȱ publicȱ sectorȱ administration,ȱ includingȱ taxȱ administration.ȱ Theȱ
Taxȱ Officeȱ hasȱ previouslyȱ raisedȱ withȱ Privacyȱ Commissionerȱ theȱ needȱ toȱ
reviewȱ theȱ Guidelines.ȱ Theȱ proposedȱ reviewȱ couldȱ usefullyȱ focusȱ onȱ
proceduralȱandȱoperationalȱmatters,ȱandȱtheȱadministrativeȱarrangementsȱthatȱ
applyȱ toȱ dataȱ matching,ȱ miningȱ andȱ analytics,ȱ ratherȱ thanȱ onȱ theȱ privacyȱ
principles.ȱ
Recommendation No.1
2.15 Theȱ ANAOȱ recommendsȱ theȱ Taxȱ Office,ȱ asȱ theȱ primaryȱ userȱ ofȱ theȱ
PrivacyȱCommissioner’sȱDataȱMatchingȱGuidelines:ȱ
x initiateȱ policyȬlevelȱ discussionȱ withȱ theȱ Officeȱ ofȱ theȱ Privacyȱ
Commissionerȱwithȱ aȱ viewȱtoȱ updatingȱ theȱ 1998ȱ publication,ȱ “Theȱ Useȱ
ofȱDataȱMatchingȱinȱCommonwealthȱAdministrationȱ–ȱGuidelines”;ȱandȱ
x asȱ appropriate,ȱ subsequentlyȱ reviseȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ
protocol,ȱtoȱreflectȱanyȱchanges.ȱ
2.16 ATOȱ Response:ȱ Agreed.ȱ Theȱ matterȱ willȱ againȱ beȱ raisedȱ withȱ theȱ
PrivacyȱCommissionerȱasȱpartȱofȱtheȱestablishedȱmeetingȱprogram.ȱ

56
3. Data matching and analytics
capability in the Tax Office
ThisȱchapterȱpresentsȱanȱanalysisȱofȱtheȱTaxȱOffice’sȱuseȱofȱitsȱcapabilityȱinȱtheȱareasȱofȱ
dataȱ matchingȱ andȱ analytics,ȱ includingȱ keyȱ arrangementsȱ toȱ oversight,ȱ coȬordinate,ȱ
promoteȱandȱevaluateȱtheȱuseȱofȱtheȱcapability,ȱandȱassessȱtheȱmainȱwaysȱinȱwhichȱitȱisȱ
operationallyȱ deployed.ȱ Thisȱ chapterȱ alsoȱ detailsȱ theȱ preȬfillingȱ ofȱ incomeȱ taxȱ returnsȱ
initiative.ȱȱ
Introduction
3.1 Taxȱ Officeȱ executivesȱ haveȱ beenȱ increasinglyȱ drawingȱ onȱ theȱ
andȱ analyticsȱ activity. 44 ȱ Accordingly,ȱ theȱ auditȱ scopeȱ includedȱ theseȱ
relationshipsȱandȱconceptualȱcommonalities.ȱTheȱauditȱwasȱguided,ȱtherefore,ȱ
byȱaȱbroaderȱdefinitionȱofȱ‘dataȱmatching’:ȱmeaningȱ‘findingȱrelationshipsȱandȱ
patternsȱ inȱ largeȱ volumesȱ ofȱ data’.ȱ Thisȱ includesȱ theȱ moreȱ traditionalȱ ideaȱ ofȱ
dataȱmatchingȱasȱ‘bringingȱtogetherȱdataȱfromȱdifferentȱsourcesȱandȱcomparingȱ
it’.ȱ
3.2 Theȱ ANAOȱ notedȱ thatȱ theȱ Taxȱ Officeȱ hasȱ aȱ rangeȱ ofȱ computerȱ basedȱ
activitiesȱthatȱcomeȱwithinȱtheȱambitȱofȱthisȱdefinition.ȱTheseȱactivitiesȱincludeȱ
theȱidentityȱmatchingȱfacility,ȱATOms,ȱtheȱdataȱmatchingȱprojectsȱcoordinatedȱ
byȱtheȱDMSCȱ,ȱandȱtheȱvarietyȱofȱprojectsȱclassifiedȱasȱanalyticsȱ(seeȱGlossary).ȱȱ
A Tax Office capability

3.3 InȱthisȱReportȱtheȱ‘dataȱmatchingȱandȱanalyticsȱcapability’ȱincludesȱallȱ
theȱ computerȬbasedȱ methodologiesȱ thatȱ theȱ Taxȱ Officeȱ appliesȱ toȱ bringȱ
togetherȱlargeȱvolumesȱofȱdataȱfromȱdifferentȱsources,ȱmakeȱcomparisons,ȱlinkȱ
dataȱ sets,ȱ compareȱ correspondingȱ items,ȱ findȱ relationshipsȱ andȱ patternsȱ andȱ
44
Variety, Australian Tax Teachers’ Association Conference, University of Queensland 22–24 January
2007.

57
constructingȱ descriptiveȱ orȱ hypotheticalȱ representationalȱ and/orȱ functionalȱ
relationships.ȱȱ
3.4 Whilstȱ thereȱ areȱ considerableȱ technicalȱ differencesȱ betweenȱ theȱ
algorithmsȱ whichȱ makeȱ upȱ theȱ computerȬbasedȱ methodologiesȱ usedȱ andȱ theȱ
particularȱusesȱtoȱwhichȱtheȱmethodologiesȱareȱput,ȱallȱtheȱmethodologiesȱhaveȱ
theȱcommonȱfeatureȱofȱbringingȱtogetherȱandȱcomparingȱlargeȱvolumesȱofȱdataȱ
fromȱdifferentȱsources.ȱTheȱTaxȱOfficeȱappliesȱtheseȱmethodologiesȱinȱdifferentȱ
waysȱandȱbyȱdifferentȱadministrativeȱproceduresȱforȱaȱrangeȱofȱcomplianceȱandȱ
serviceȱimprovementȱinitiatives,ȱandȱtoȱbetterȱunderstandȱcomplianceȱrisksȱandȱ
behaviour.ȱȱ
3.5 Theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ notȱ onlyȱ consistsȱ ofȱ theseȱ
computerȬbasedȱ methodologiesȱ butȱ alsoȱ includesȱ theȱ advancedȱ professionalȱ
skillsȱofȱtheȱstaffȱwhoȱdevelopȱtheȱsoftwareȱandȱinterpretȱtheȱresultsȱgeneratedȱ
byȱ theȱ software,ȱ andȱ specialisedȱ informationȱ technologyȱ softwareȱ (includingȱ
proprietaryȱandȱ‘offȬtheȬshelf’ȱsoftware)ȱandȱhardware.ȱȱ
3.6 Aȱ paradigmȱ shiftȱ inȱ taxȱ administrationȱ isȱ notedȱ inȱ whichȱ highȱ qualityȱ
dataȱandȱtheȱdataȱmatchingȱandȱanalyticsȱcapabilityȱwouldȱbeȱusedȱtoȱprovideȱ
newȱ andȱ betterȱ webȬbasedȱ servicesȱ atȱ theȱ timeȱ taxpayersȱ completeȱ theirȱ taxȱ
returns.ȱ Thisȱ isȱ aȱ pioneeringȱ shiftȱ fromȱ bulkȱ postȬassessmentȱ incomeȱ dataȱ
matchingȱtoȱtheȱpreȬfillingȱofȱelectronicȱtaxȱreturnsȱwithȱdataȱthatȱwouldȱhaveȱ
beenȱusedȱinȱsemiȬautomatedȱpostȬassessmentȱdataȱmatching.ȱAȱfeatureȱofȱtheȱ
paradigmȱshiftȱisȱtoȱuseȱtheȱcapabilityȱtoȱachieveȱcomplianceȱbyȱtheȱprovisionȱ
ofȱ services,ȱ especiallyȱ webȬbasedȱ services,ȱ ratherȱ thanȱ byȱ postȬassessmentȱ
verification.ȱTheȱparadigmȱshiftȱisȱexpectedȱtoȱmakeȱcomplianceȱeasier,ȱcheaperȱ
andȱmoreȱpersonalised.ȱTheȱcapabilityȱwillȱcontinueȱsupportȱriskȱmanagementȱ
throughȱtheȱusualȱwideȱrangeȱofȱdataȱmatchingȱandȱanalyticsȱactivityȱthatȱtakesȱ
placeȱafterȱtheȱreceiptȱofȱtaxȱreturnsȱandȱrelatedȱinformation.ȱȱ
3.7 AlthoughȱtraditionalȱsemiȬautomatedȱdataȬmatchingȱhasȱbeenȱaȱfeatureȱ
ofȱ taxȱ administrationȱ sinceȱ theȱ 1970s, 45 ȱ theȱ Taxȱ Officeȱ hasȱ onlyȱ recentlyȱ
developedȱ theȱ moreȱ comprehensiveȱ dataȱ matchingȱ andȱ analyticsȱ capability.ȱ
Theȱ capabilityȱ supportsȱ theȱ Taxȱ Office’sȱ managementȱ ofȱ complianceȱ risk,ȱ
45
Audit Report No.1 of 1995–96, Income Matching System, reported on the Tax Office’s computer based
system which identified discrepancies between information in tax returns and external data, noting that
the system had been in operation since late 1987.

58
Data matching and analytics capability in the Tax Office
whichȱ isȱ basedȱ onȱ complianceȱ behaviourȱ summarisedȱ inȱ theȱ Complianceȱ
Model. 46 ȱTheȱpreviousȱCommissionerȱofȱTaxationȱstated:ȱ
Itȱisȱclearȱthatȱdataȱmatchingȱisȱanȱefficientȱandȱeffectiveȱwayȱtoȱhelpȱensureȱtheȱ
integrityȱofȱourȱrevenueȱsystem.ȱForȱthisȱreasonȱweȱareȱcontinuingȱtoȱexploreȱ
waysȱ toȱ improveȱ ourȱ dataȱ matchingȱ capabilityȱ andȱ toȱ focusȱ dataȱ matchingȱ
exercisesȱonȱgenuineȱrisksȱtoȱtheȱcommunity’sȱrevenueȱbase. 47ȱ
3.8 TheȱTaxȱOffice’sȱdataȱmatchingȱandȱanalyticsȱcapabilityȱextendsȱbeyondȱ
thatȱ traditionallyȱ consideredȱ toȱ beȱ dataȱ matchingȱ (e.g.ȱ identityȱ matching,ȱ
incomeȱ matchingȱ usingȱ theȱ ATOmsȱ andȱ DMSCȱ facilitatedȱ dataȱ matchingȱ
complianceȱ projects)ȱ andȱ encompassesȱ theȱ fullȱ spectrumȱ ofȱ Taxȱ Officeȱ dataȱ
matchingȱ andȱ analyticsȱ activity.ȱ Theȱ Taxȱ Office’sȱ complianceȱ modelȱ
emphasisesȱ thatȱ theȱ provisionȱ ofȱ servicesȱ toȱ taxpayersȱ mayȱ beȱ theȱ mostȱ
appropriateȱ Taxȱ Officeȱ responseȱ toȱ theȱ complianceȱ risksȱ presentedȱ byȱ theȱ
majorityȱ ofȱ taxpayersȱ whoȱ seekȱ toȱ complyȱ withȱ theirȱ taxȱ obligations. 48 ȱ Theȱ
provisionȱ ofȱ educativeȱ servicesȱ isȱ generallyȱ consideredȱ asȱ partȱ ofȱ Taxȱ Officeȱ
riskȱmitigationȱplans.ȱȱ
3.9 Increasingly,ȱ asȱ theȱ Taxȱ Office’sȱ ECMPȱ Changeȱ Programȱ maturesȱ withȱ
theȱevolvingȱdataȱmatchingȱandȱanalyticsȱcapability,ȱtheȱprovisionȱofȱaȱserviceȱ
mayȱbeȱusedȱmoreȱreadilyȱasȱaȱkeyȱstrategicȱresponseȱtoȱcomplianceȱrisks,ȱsuchȱ
asȱ taxpayersȱ misunderstandingȱ theirȱ obligations.ȱ Inȱ thisȱ context,ȱ theȱ ANAOȱ
consideredȱ thatȱ theȱ administrativeȱ arrangementsȱ thatȱ operateȱ acrossȱ businessȱ
linesȱ toȱ harnessȱ theseȱ developments,ȱ andȱ makeȱ theȱ mostȱ ofȱ theȱ potentialȱ ofȱ
ECMPȱChangeȱProgramȱandȱtheȱemergingȱcapability,ȱcouldȱbeȱmoreȱintegrated.ȱȱ
3.10 TheȱTaxȱCommissionerȱhasȱtakenȱaȱbroadȱviewȱofȱtheȱcapability:ȱ
Asȱ ourȱ Integratedȱ Coreȱ Processingȱ matures,ȱ weȱ willȱ beȱ ableȱ toȱ developȱ moreȱ
refinedȱriskȱmodelsȱwithȱwiderȱdataȱwarehousing,ȱanalytics,ȱandȱdataȱminingȱ
andȱmatchingȱcapabilities.ȱTheseȱcapabilitiesȱwillȱmeanȱthatȱweȱwillȱbeȱableȱtoȱ
46
ATO April 1998.
47
Michael Carmody, Data Matching Improves Compliance, 28 September 2005, <www.ato.gov.au>
[accessed 20 February 2007].
48
“Provision of services” includes web-based services such as pre-filling, prompts, reminders and
specialised calculators embedded into web-based facilities, computer generated alerts, reminder and
warning letters, educational campaigns in national or specialised media and telephonic communications.

59
betterȱ differentiateȱ betweenȱ thoseȱ taxpayersȱ whoȱ areȱ tryingȱ toȱ doȱ theȱ rightȱ
thingȱandȱthoseȱthatȱareȱnot. 49ȱ
3.11 Legislationȱ requiresȱ thatȱ quotationȱ ofȱ theȱ Taxȱ Fileȱ Numberȱ (TFN)ȱ isȱ
voluntaryȱinȱtaxȱadministration,ȱandȱtheȱuseȱofȱaȱuniqueȱnumericȱ identifierȱisȱ
notȱrequiredȱinȱmostȱnonȱtaxationȱsituations. 50 ȱTheȱTaxȱOfficeȱhasȱdevelopedȱitsȱ
dataȱ matchingȱ andȱ analyticsȱ capabilityȱ partlyȱ toȱ addressȱ thisȱ challenge.ȱ
Nevertheless,ȱpartlyȱbecauseȱofȱshortcomingsȱinȱtheȱqualityȱofȱthirdȱpartyȱdataȱ
sets,ȱ theȱ Taxȱ Officeȱisȱ sometimesȱ unableȱtoȱ associateȱ aȱuniqueȱ identifierȱtoȱallȱ
relevantȱrecordsȱand/orȱtoȱlinkȱsatisfactorilyȱparticularȱdataȱitemsȱinȱthirdȱpartyȱ
dataȱsetsȱ toȱentriesȱ inȱ taxȱreturnsȱthatȱ shouldȱ correspond.ȱ Additionalȱforensicȱ
investigationsȱ areȱ sometimesȱ necessary.ȱ Relevantȱ legislationȱ providesȱ thatȱ
quotationȱofȱtheȱTFNȱisȱoptionalȱforȱtaxpayersȱinȱrespectȱofȱaȱrangeȱofȱfinancialȱ
transactions.ȱ Asȱ aȱ result,ȱ someȱ incomeȱ reportsȱ providedȱ toȱ theȱ Taxȱ Officeȱ doȱ
notȱrecordȱaȱTFN.ȱAȱtaxpayerȱ(thatȱis,ȱaȱperson,ȱcompany,ȱpartnership,ȱtrustȱorȱ
superannuationȱ fund)ȱ isȱ notȱ requiredȱ toȱ quoteȱ theirȱ TFNȱ inȱ anyȱ ofȱ theirȱ
dealingsȱ withȱ theȱ Taxȱ Office.ȱ However,ȱ sinceȱ 1990ȱ legislationȱ governingȱ theȱ
useȱ ofȱ theȱ TFNȱ forȱ theȱ receiptȱ ofȱ mostȱ Commonwealthȱ incomeȱ supportȱ
paymentsȱ hasȱ requiredȱ thatȱ peopleȱ claimingȱ orȱ inȱ receiptȱ ofȱ thisȱ assistance,ȱ
haveȱtoȱprovideȱaȱTFNȱasȱaȱconditionȱofȱreceivingȱsuchȱpayments. 51ȱ
3.12 Someȱmajorȱincomeȱstreamsȱ(e.g.ȱrents,ȱassessableȱgovernmentȱbenefits,ȱ
salesȱofȱassetsȱwithȱpossibleȱcapitalȱgainsȱtaxȱimplications)ȱareȱnotȱrequiredȱtoȱ
beȱreportedȱsystematicallyȱtoȱtheȱTaxȱOfficeȱbyȱthirdȱparties.ȱWhereȱsuchȱdataȱ
49
Michael D’Ascenzo, The Pursuit of Simplicity – Simply Impossible, Australasian Tax Teachers
Association Conference, University of Queensland, 22–24 January 2007.
50
A taxpayer (that is, a person, company, partnership, trust or superannuation fund) is not compelled to
quote their TFN in any of their dealings with the Tax Office. This makes Australia unusual amongst
nations with TFN type identifiers. Since 1990 legislation governing the use of the TFN for the receipt of
most Commonwealth income support payments has required that people claiming, or receiving, this
assistance have to provide a TFN as a condition of receiving such payments. TFN withholding taxes are
imposed (subject to several exemptions) for not quoting a TFN for specific financial transactions (such as
the interest earned on investment accounts). The TFN withholding tax imposed is at the top marginal tax
rate (plus the Medicare levy) and applied to the interest earned above a minimum threshold of $120 per
annum for interest earned and to each $1 earned as dividends. The top marginal tax rate (plus the
Medicare levy) is imposed on the actual salary and wage income being paid for not quoting the TFN on
the Employment Declaration Form regardless of the actual income. For further details see Audit Report
No.37 1998-99 Management of Tax File Numbers Australian Taxation Office.
51
TFN withholding taxes are imposed (subject to several exemptions) for not quoting a TFN for specific
financial transactions (such as the interest earned on investment accounts). The TFN withholding tax
imposed is at the top marginal tax rate (plus the Medicare levy) and applied to the interest earned above
a minimum threshold of $120 per annum for interest earned and to each $1 earned as dividends. The top
marginal tax rate (plus the Medicare levy) is imposed on the actual salary and wage income being paid
for not quoting the TFN on the Employment Declaration Form regardless of the actual income. For
further details see Audit Report No.37 1998-99 Management of Tax File Numbers Australian Taxation
Office.

60
isȱ requisitioned,ȱ existingȱ legislationȱ wouldȱ precludeȱ theȱ reportingȱ bodyȱ fromȱ
havingȱ accessȱ toȱ theȱ TFN,ȱ requiringȱ thatȱ otherȱ lessȱ effectiveȱ matchingȱ criteriaȱ
mustȱ beȱ used.ȱ Theȱ ANAOȱ notedȱ theseȱ featuresȱ doȱ notȱ applyȱ inȱ aȱ numberȱ ofȱ
sovereignȱstatesȱthatȱareȱmembersȱofȱtheȱOECD. 52ȱ
Data matching and analytics: administrative framework

3.13 Australia’sȱ taxationȱ systemȱ ofȱ selfȱ assessmentȱ placesȱ responsibilityȱ onȱ
and/orȱoffsetsȱtoȱwhichȱtheyȱareȱentitled.ȱInȱadministeringȱtheȱtaxationȱsystem,ȱ
theȱTaxȱOfficeȱhasȱtoȱbalanceȱtheȱunderlyingȱprinciplesȱofȱselfȱassessmentȱwithȱ
theȱneedȱtoȱmanageȱrisks,ȱsuchȱasȱlackȱofȱcomplianceȱwithȱlegislation,ȱfailingsȱ
inȱ theȱ integrityȱ ofȱ theȱ taxȱ system,ȱ damageȱ toȱ theȱ Taxȱ Office’sȱ reputation,ȱ andȱ
erosionȱofȱtheȱCommonwealth’sȱrevenueȱbase,ȱasȱefficientlyȱandȱasȱeffectivelyȱ
asȱpossible. 53ȱ
3.14 InȱaȱselfȬassessmentȱsystemȱtheȱTaxȱOfficeȱseeksȱtoȱachieveȱhighȱlevelsȱ
ofȱ complianceȱ byȱ usingȱ theȱ Complianceȱ Modelȱ ofȱ behaviourȱ toȱ guideȱ theȱ
applicationȱ ofȱ riskȱ mitigationȱ strategies.ȱ Theȱ Complianceȱ Model,ȱ whichȱ isȱ
depictedȱ inȱ Figȱ 3.1,ȱ summarisesȱ aȱ considerableȱ bodyȱ ofȱ knowledgeȱ aboutȱ theȱ
reasonsȱ whyȱ peopleȱ functionȱ theȱ wayȱ theyȱ doȱ inȱ relationȱ toȱ society’sȱ
institutionalȱ arrangements.ȱ Theȱ Modelȱ showsȱ theȱ mostȱ costȬeffectiveȱ
complianceȱstrategyȱthatȱtheȱTaxȱOfficeȱshouldȱadoptȱforȱaȱparticularȱgroupȱofȱ
taxpayers.ȱTheȱModelȱprovidesȱaȱknowledgeȬbasedȱframeworkȱforȱdeterminingȱ
theȱ mostȱ appropriateȱ strategyȱ toȱ takeȱ inȱ relationȱ toȱ aȱ complianceȱ problem,ȱ
givenȱwhatȱisȱknownȱaboutȱtaxpayers,ȱtheirȱsituation,ȱcircumstances,ȱandȱlinesȱ
ofȱbusiness.ȱTheȱModelȱwasȱfirstȱpresentedȱinȱ1998ȱinȱtheȱSecondȱReportȱofȱtheȱ
CashȱEconomyȱTaskȱForce,ȱImprovingȱTaxȱComplianceȱinȱtheȱCashȱEconomyȱATO,ȱ
Aprilȱ1998.ȱȱ
3.15 Riskȱ mitigationȱ strategiesȱ rangeȱ fromȱ theȱ communicationȱ ofȱ
informationȱtoȱhelpȱtaxpayersȱfulfilȱtheirȱobligationsȱtoȱcriminalȱprosecutionȱtoȱ
stopȱ andȱ deterȱ egregiousȱ nonȬcompliance.ȱ Inȱ termsȱ ofȱ resourceȱ investments,ȱ
auditsȱhaveȱtraditionallyȱconstitutedȱtheȱprimaryȱformȱofȱverificationȱadoptedȱ
byȱ revenueȱ bodies,ȱ includingȱ theȱ Taxȱ Office,ȱ toȱ checkȱ taxpayers’ȱ complianceȱ
52
OECD Centre for Tax Policy and Administration, 2006. Using Third Party Information Reports to Assist
Taxpayers Meet their Return Filing Obligations – Country Experiences With the Use of Pre-populated
Personal Tax Returns. See <http://www.oecd.org/dataoecd/42/14/36280368.pdf> especially appendix 1.
53
There is also a range of legislative measures, including withholding taxes, designed to mitigate some
compliance risks.

61
withȱ theirȱ obligations.ȱ However,ȱ thereȱ areȱ practicalȱ limitationsȱ regardingȱ theȱ
levelȱofȱtaxpayerȱandȱincomeȱcoverageȱachievableȱfromȱauditȱactivities.ȱ
3.16 Theȱ Taxȱ Office’sȱ complianceȱ workȱ isȱ guidedȱ byȱ theȱ Taxpayers’ȱ Charterȱ
andȱ theȱ Complianceȱ Modelȱ (Figureȱ 3.1).ȱ Theȱ Taxȱ Officeȱ hasȱ committedȱ toȱ
administerȱ theȱ taxȱ systemȱ fairlyȱ byȱ helpingȱ peopleȱ ‘doȱ theȱ rightȱ thing’, 54 ȱ byȱ
makingȱ itȱ asȱ easyȱ asȱ possibleȱ forȱ taxpayersȱ toȱ comply,ȱ andȱ byȱ identifyingȱ
peopleȱ whoȱ areȱ notȱ meetingȱ theirȱ obligationsȱ andȱ dealingȱ withȱ themȱ
appropriately. 55 ȱItsȱbusinessȱintentȱisȱtoȱ‘toȱoptimiseȱvoluntaryȱcomplianceȱandȱ
makeȱpaymentsȱunderȱtheȱlawȱinȱaȱwayȱthatȱbuildsȱcommunityȱconfidence’. 56 ȱȱ
Figure 3.1
Tax Office’s compliance model
High
business industry Have Use full
decided not force of
to comply the Law
Le
ve
Don’t want Dater by
lo
to comply deflection
fc
Taxpayer
om
pli
an
Try to, but
ce
Help to
psychological sociological don’t always
co
comply
sts
succeed
Willing to Make
do the it easy
right thing
economic
Create pressure down
Low
Attitude to Compliance
Factors that influence taxpayer behaviour compliance strategy
ȱ
Source: Tax Office Compliance Program 2006–07.
3.17 Theȱ Taxȱ Officeȱ publishesȱ theȱ Complianceȱ Programȱ annually.ȱ Dataȱ
matchingȱ andȱ analyticsȱ haveȱ beenȱ identifiedȱ inȱ theȱ lastȱ fourȱ complianceȱ
programsȱasȱaȱkeyȱpostȱassessmentȱcomplianceȱactivity.ȱ
3.18 Theȱ Taxȱ Officeȱ Strategicȱ Statementȱ 2006–2010ȱ statedȱ thatȱ oneȱ ofȱ theȱ
purposesȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ isȱ toȱ enableȱ theȱ Taxȱ Officeȱ toȱ makeȱ
betterȱ riskȱ managementȱ choicesȱ andȱ toȱ differentiateȱ betweenȱ thoseȱ whoȱ wantȱ
54
For example, in a recent speech the Commissioner of Taxation stated “We treat taxpayers fairly in
accordance with the law, and at the same time we have strategies to deter, detect and address non-
compliance based on risk management. Ultimately, this is to ensure that taxpayers who do the right thing
are not at a competitive disadvantage relative to others”. “Making tax less taxing for small business”
Speech by Michael D’Ascenzo, Commissioner of Taxation, to the Council of Small Business
Organisations of Australia, Melbourne, Tuesday 27 June 2006; p. 1.
55
See http://www.ato.gov.au/corporate/content.asp?doc=/Content/5704.htm
56
Australian Taxation Office, 2006, Strategic Statement 2006–10, p. 3.

62
toȱdoȱtheȱrightȱthingȱandȱthoseȱwhoȱdoȱnot.ȱTheȱStatementȱadvisesȱthatȱtheȱTaxȱ
Officeȱ aimsȱ toȱ beȱ invisibleȱ toȱ compliantȱ taxpayers,ȱ otherȱ thanȱ whenȱ theyȱ
requireȱhelpȱbutȱwillȱbeȱhighlyȱvisibleȱtoȱthoseȱwhoȱchooseȱnotȱtoȱcomply.ȱ
3.19 Inȱ theȱ Taxȱ Officeȱ theȱ identificationȱ ofȱ strategicȱ processesȱ toȱ manageȱ
complianceȱ risksȱ takesȱ placeȱ withinȱ aȱ broadȱ frameworkȱ ofȱstrategicȱ planning,ȱ
riskȱidentificationȱandȱassessment.ȱDataȱmatchingȱandȱanalyticsȱactivitiesȱmayȱ
formȱaȱcomponentȱofȱtheseȱstrategicȱresponses.ȱInȱaddition,ȱdataȱmatchingȱandȱ
analyticsȱ projectsȱ haveȱ invariablyȱ informedȱ theȱ identificationȱ ofȱ complianceȱ
risksȱandȱtheȱshapingȱofȱstrategicȱprocessesȱtoȱmitigateȱtheseȱrisks.ȱȱ
3.20 Theȱ Taxȱ Officeȱ hasȱ aȱ formalȱ ‘Healthȱ ofȱ theȱ Systemȱ Assessment’ȱ
(HOTSA)ȱ processȱ thatȱ informsȱ theȱ developmentȱ ofȱ theȱ Complianceȱ Programȱ
andȱaȱrangeȱofȱriskȱmitigationȱplans.ȱTheȱHOTSAȱprocessȱassessesȱtheȱ‘health’ȱ
ofȱ theȱ revenueȱ systemȱ inȱ aȱ holisticȱ context,ȱ consideringȱ componentsȱ suchȱ asȱ
particularȱ revenueȱ typesȱ (e.g.ȱ GST,ȱ incomeȱ tax),ȱ marketȱ segmentsȱ (e.g.ȱ
individuals,ȱlargeȱbusinesses)ȱorȱriskȱareasȱ(e.g.ȱaggressiveȱtaxȱplanning).ȱȱ
3.21 Theȱ Taxȱ Officeȱ planningȱ processesȱ addressȱ theȱ majorȱ classesȱ ofȱ risksȱ
identifiedȱbyȱtheȱHOTSAȱprocess.ȱTheȱdetailedȱmanagementȱofȱparticularȱrisksȱ
mayȱoccurȱinȱaȱnumberȱofȱTaxȱOfficeȱbusinessȱlinesȱandȱwillȱoftenȱincludeȱdataȱ
matchingȱ andȱ analyticȱ activities.ȱ Theȱ DMSCȱ assistsȱ businessȱ linesȱ withȱ theȱ
coordinationȱofȱproposedȱ dataȱmatchingȱ projects.ȱ TheȱDMSCȱ alsoȱencouragesȱ
businessȱlinesȱtoȱconsiderȱtheȱmeritsȱofȱdataȱmatchingȱactivitiesȱasȱaȱresponseȱ
toȱ identifiedȱ risks.ȱ Aȱ comparableȱ processȱ forȱ theȱ coordinationȱ ofȱ analyticsȱ
projectsȱ acrossȱ theȱ Taxȱ Officeȱ orȱ forȱ facilitatingȱ theȱ useȱ ofȱ analyticsȱ inȱ riskȱ
responsesȱhadȱnotȱbeenȱestablished.ȱȱȱȱ
Data matching and analytics: methodologies

3.22 Dataȱ matchingȱ andȱ analyticsȱ includesȱ theȱ identityȱ matchingȱ systemsȱ
andȱ ATOms,ȱ theȱ dataȱ matchingȱ projectsȱ coordinatedȱ byȱ theȱ DMSCȱ andȱ theȱ
varietyȱ ofȱ analyticsȱ projectsȱ administeredȱ byȱ theȱ OCKO.ȱ Theȱ Businessȱ
Solutionsȱ businessȱ lineȱ alsoȱ conductedȱ anȱ evaluationȱ ofȱ theȱ Taxȱ Office’sȱ
identityȱmatchingȱfacility.ȱItȱisȱdesigningȱaȱnewȱidentityȱmatchingȱfacilityȱandȱ
replacementȱcomponentsȱforȱATOms.ȱȱ
3.23 Theȱ DMSCȱ consistsȱ ofȱ representativesȱ fromȱ allȱ complianceȱ businessȱ
lines,ȱtheȱoperationsȱbusinessȱlineȱandȱtheȱOCKO.ȱTheȱDMSCȱmeetsȱquarterly,ȱ
andȱ facilitatesȱ theȱ useȱ ofȱ dataȱ matching,ȱ theȱ acquisitionȱ andȱ managementȱ ofȱ
data,ȱandȱtheȱeffectiveȱuseȱofȱdataȱacquiredȱbyȱbusinessȱlines.ȱȱ

63
3.24 Anȱ overviewȱ ofȱ theȱ identityȱ matchingȱ systems,ȱ ATOms,ȱ theȱ dataȱ
matchingȱ projectsȱ coordinatedȱ byȱ theȱ DMSCȱ andȱ theȱ analyticsȱ projectsȱ isȱ
presentedȱ inȱ theȱ followingȱ paragraphs.ȱ Figureȱ 3.2ȱ depictsȱ theȱ broadȱ
relationshipsȱ betweenȱ dataȱ matching,ȱ identityȱ matching,ȱ preȬfillingȱ andȱ
analyticsȱactivities.ȱ

64
Figure 3.2 57
Tax Office data matching and analytics capability
Data Data Identity Unmatched

Provider Acquisition Matching data
Sample high
value for non
registered
• Availability Data Take On

• Quality/ Quantity
• Cost
• Compatibility
• Format Analytic Data Mart Data
(Client Analytic Record) Matching
Enterprise Data
Warehouse
Interest received to
interest declared
ATOMS processing
Selected Pre-fill Analytics
available Models
Risk Chart r f audit-csv.txt [test] Adjustment
Legal practitioners
professional list to
100
lodgement
80
Results &
Performance ( %)
60
Revenue
Adjustments
Strike Rate
measures of
40
28%
Online Analytical effectiveness

20
Processing Others
0
0 20 40 60 80 100
(Human guided)
Caseload (%)
Rattle 2006-10-02 16:27:39 Stuart
Data mining
(machine learning)
Models with embedded case

selection rules and learning
loop – rule refinement
Compliance checks
• Have they lodged?
• Have they reported accurately?
• Have they paid?
ȱ
Source: Tax Office
Identity matching
3.25 Inȱ Auditȱ Reportȱ No.48ȱ 2003–04,ȱ Theȱ Australianȱ Taxationȱ Officeȇsȱ
ManagementȱandȱUseȱofȱAnnualȱInvestmentȱIncomeȱReports,ȱtheȱANAOȱfoundȱtheȱ
57
Figure 3.2 shows the Tax Office’s broad approach to the identification of data matching and analytics
strategies as appropriate responses to risks and the consequential action of data acquisition. ANAO is
satisfied that this conceptual diagram generally depicts actual practice. Furthermore, the ANAO noted
that Tax Office practice in relation to the diagram has improved over recent years and that the initiatives
of the DMSC have assisted in this regard.

65
TaxȱOffice’sȱidentityȱmatchingȱsystemȱofȱcomputerȱprograms,ȱparticularlyȱtheirȱ
phoneticȱ scoringȱ capacity, 58 ȱ toȱ beȱ highlyȱ effective.ȱ Thereȱ isȱ internationalȱ
recognitionȱ ofȱ theȱ Taxȱ Office‘sȱ expertiseȱ inȱ thisȱ areaȱ (especiallyȱ byȱ nationalȱ
revenueȱ authoritiesȱ ofȱ someȱ memberȱ statesȱ ofȱ theȱ OECD)ȱ andȱ thatȱ thereȱ hasȱ
beenȱincreasingȱwholeȬofȬgovernmentȱinterestȱinȱidentityȱmatching. 59 ȱȱ
3.26 TheȱidentityȱmatchingȱsystemȱprovidesȱtheȱTaxȱOfficeȱwithȱaȱcorporateȱ
levelȱ identityȱ matchingȱ serviceȱ andȱ canȱ beȱ usedȱ toȱ enableȱ aȱ broadȱ rangeȱ ofȱ
matchingȱrelatedȱactivities.ȱFurther,ȱthisȱsystemȱisȱessentialȱinȱanȱenvironmentȱ
whereȱ sourceȱ dataȱ isȱ providedȱ byȱ theȱ public,ȱ orȱ mightȱ notȱ containȱ identifiersȱ
suchȱasȱTFNsȱorȱABNs.ȱAsȱpreviouslyȱnoted,ȱrelevantȱlegislationȱprovidesȱthatȱ
quotationȱofȱtheȱTFNȱisȱoptionalȱforȱtaxpayersȱinȱrespectȱofȱaȱrangeȱofȱfinancialȱ
transactions.ȱ Aȱ taxpayerȱ (thatȱ is,ȱ aȱ person,ȱ company,ȱ partnership,ȱ trustȱ orȱ
superannuationȱ fund)ȱ isȱ notȱ requiredȱ toȱ quoteȱ theirȱ TFNȱ inȱ anyȱ ofȱ theirȱ
dealingsȱwithȱtheȱTaxȱOffice.ȱAsȱaȱresult,ȱthereȱcanȱbeȱtransactionsȱandȱrecordsȱ
withinȱ relevantȱ dataȱ basesȱ thatȱ lackȱ thisȱ numericȱ identifier.ȱ Inȱ suchȱ casesȱ theȱ
TaxȱOfficeȱhasȱaȱrequirementȱforȱaȱsophisticatedȱidentityȱmatchingȱsystemȱthatȱ
canȱestablish,ȱwithȱaȱsufficientȱlevelȱofȱconfidence,ȱtheȱidentityȱofȱtheȱpersonȱorȱ
entityȱbelongingȱtoȱtheȱtransactionȱorȱrecord.ȱSomeȱtransactionsȱorȱrecordsȱmayȱ
ultimatelyȱrequireȱinvestigationȱbyȱTaxȱOfficeȱstaffȱinȱorderȱtoȱlinkȱreliablyȱtoȱaȱ
personȱorȱentity.ȱȱ
3.27 Theȱ Taxȱ Office’sȱ matchingȱ engineȱ hasȱ capacityȱ toȱ processȱ upȱ toȱ
400ȱ000ȱ000ȱ transactionsȱ annually.ȱ Inȱ 2007ȱ itȱ processedȱ justȱ overȱ 220ȱ000ȱ000ȱ
transactions,ȱ includingȱ allȱ ofȱ theȱ AIIRȱ data,ȱ asȱ wellȱ asȱ Centrelinkȱ statements,ȱ
Payȱ Asȱ Youȱ Goȱ (PAYG)ȱ data,ȱ familyȱ taxȱ benefit,ȱ superannuation,ȱ Healthȱ
Insuranceȱ Commissionȱ transactions,ȱ Babyȱ Bonus,ȱ Higherȱ Educationȱ
Contributionȱ Scheme/Studentȱ Financialȱ Supplementȱ Schemeȱ (HECS/SFSS)ȱ
transactionsȱ andȱ aȱ largeȱ rangeȱ ofȱ adȱ hocȱ projects,ȱ includingȱ routineȱ matchingȱ
withȱtheȱAustralianȱelectoralȱroll.ȱȱ
3.28 Theȱ matchingȱ routinesȱ areȱ appliedȱ toȱ bothȱ individualȱ andȱ
nonȬindividualȱrecords.ȱTheȱengineȱproducesȱhighȱmatchȱratesȱwithȱorȱwithoutȱ
identifiers,ȱwithȱmatchȱratesȱtypicallyȱexceedingȱ90ȱperȱcentȱonȱindividualȱdataȱ
streamsȱandȱ80ȱperȱcentȱonȱnonȬindividualȱdataȱstreams.ȱȱ
58
This is achieved through use of a fully customised edit list (name dictionary) capable of identifying typing
and spelling errors, ethnic name anglicisation issues, orthographic and phonetic misinterpretation,
truncation and abbreviation, missing words and extra words and word sequence variation.
59
See Audit Report No.48 2003–04, The Australian Taxation Office’s Management and Use of Annual
Investment Income Reports; paragraph 2.26, p. 39.

66
3.29 Theȱ Taxȱ Officeȱ developedȱ aȱ prototype,ȱ orȱ proofȱ ofȱ concept,ȱ negativeȱ
searchȱfacilityȱtoȱsupportȱ theȱTaxȱ Office’sȱ registrationȱ ofȱindividuals.ȱ Theȱ Taxȱ
Officeȱhadȱestablishedȱtheȱneedȱforȱaȱnegativeȱsearchȱfacilityȱinȱrelationȱtoȱtheȱ
registrationȱ ofȱ individuals. 60 ȱ Itȱ wasȱ forȱ thisȱ reasonȱ thatȱ theȱ prototypeȱ wasȱ
developed.ȱTheȱexpectationȱwasȱthatȱitȱwouldȱestablishȱwithȱaȱknownȱdegreeȱofȱ
confidenceȱthatȱaȱnewȱindividualȱregistrantȱwasȱnotȱonȱtheȱTaxȱOfficeȱdatabase.ȱȱ
3.30 Aȱ negativeȱ searchȱ facilityȱ wouldȱ enableȱ theȱ softwareȱ toȱ concludeȱ thatȱ
theȱ searchedȬforȱ itemȱ isȱ notȱ onȱ aȱ database.ȱ Inȱ identityȱ matchingȱ aȱ successfulȱ
negativeȱ searchȱ concludesȱ thatȱ theȱ identityȱ soughtȱ isȱ definitelyȱ notȱ onȱ theȱ
database.ȱ Asȱ thereȱ isȱ aȱ degreeȱ ofȱ asymmetryȱ betweenȱ Taxȱ Officeȱ andȱ thirdȱ
partyȱdatabases,ȱaȱnegativeȱsearchȱfacilityȱwouldȱconcludeȱ(withȱaȱgivenȱlevelȱ
ofȱ confidence)ȱ whetherȱ aȱ nameȱ onȱ theȱ Taxȱ Officeȱ databaseȱ wasȱ notȱ onȱ thirdȱ
partyȱ dataȱ basesȱ andȱ conversely,ȱ whetherȱ aȱ nameȱ onȱ aȱ thirdȱ partyȱ databaseȱ
wasȱ notȱ onȱ theȱ Taxȱ Officeȱ dataȱ base.ȱ Givenȱ theȱ asymmetry,ȱ aȱ positiveȱ
conclusionȱȬȱthatȱaȱnameȱonȱoneȱdataȱbaseȱisȱonȱanotherȱ(withȱaȱgivenȱlevelȱofȱ
confidence)ȱȬȱisȱdifferentȱfromȱaȱnegativeȱoneȱ–ȱthatȱaȱnameȱonȱoneȱdataȱbaseȱisȱ
notȱ onȱ theȱ otherȱ (withȱ aȱ givenȱ levelȱ ofȱ confidence).ȱ Oneȱ ofȱ theȱ valuesȱ toȱ taxȱ
administrationȱ thatȱ aȱ negativeȱ searchȱ facilityȱ providesȱ atȱ theȱ timeȱ ofȱ
registration,ȱ forȱ example,ȱ isȱ toȱ ensureȱ aȱ newȱ registrantȱ isȱ notȱ anȱ existingȱ one,ȱ
thusȱimprovingȱtheȱintegrityȱofȱtaxȱdataȱbases.ȱ
3.31 Inȱtheȱabsenceȱofȱaȱnegativeȱsearchȱfacility,ȱdiscrepantȱcasesȱhaveȱtoȱbeȱ
resolvedȱ byȱ individualȱ manualȱ investigation.ȱ Theȱ ANAOȱ consideredȱ thatȱ theȱ
newȱ environmentȱ ofȱ theȱ ECMPȱ Changeȱ Program’sȱ ICP,ȱ preȬfillingȱ andȱ otherȱ
possibleȱ webȬbasedȱ servicesȱ requiresȱ theȱ highestȱ levelȱ integrityȱ ofȱ dataȱ basesȱ
obtainable.ȱThereforeȱincorporationȱofȱaȱnegativeȱsearchȱfacilityȱisȱaȱkeyȱaspectȱ
ofȱachievingȱthatȱintegrity.ȱȱ
3.32 Theȱ Taxȱ Officeȱ advisedȱ thatȱ theȱ furtherȱ developmentȱ ofȱ theȱ negativeȱ
searchȱproofȱofȱconceptȱprototypeȱwasȱputȱonȱhold,ȱpendingȱtheȱdevelopmentsȱ
outlinedȱinȱtheȱnextȱsectionȱinȱrelationȱtoȱsuperannuationȱadministration.ȱȱ
Improvements to the Tax Office’s identity matching
3.33 Inȱ 2006ȱ theȱ Taxȱ Officeȱ soughtȱ tendersȱ toȱ enhanceȱ existingȱ identityȱ
matchingȱ methodology.ȱ Theȱ Taxȱ Officeȱ wishedȱ toȱ examineȱ newȱ generationȱ
identityȱmatchingȱcomputerȱsoftwareȱthatȱwouldȱtakeȱmaximumȱadvantageȱofȱ
60 A ‘negative search’ facility can match and report a ‘No Match’ as a success; that is, establish with a
specific level of confidence, that the entity does not exist in the data being searched.

67
theȱ newȱ technologyȱ ofȱ theȱ ECMPȱ Changeȱ Program,ȱ provideȱ aȱ moreȱ agileȱ
solutionȱandȱbeȱsustainableȱinȱtheȱlongerȱterm.ȱȱ
3.34 Aȱ featureȱ ofȱ theȱ ECMPȱ Changeȱ Programȱ isȱ thatȱ allȱ processingȱ willȱ takeȱ
placeȱonȱtheȱoneȱsystem,ȱICP.ȱAllȱthirdȱpartyȱdataȱwouldȱbeȱplacedȱonȱtheȱICP,ȱ
asȱwell.ȱInȱmovingȱawayȱfromȱmultipleȱdataȱsources,ȱtheȱTaxȱOfficeȱconsideredȱ
thatȱ thereȱ wouldȱ beȱ overallȱ economiesȱ ofȱ scaleȱ ifȱ identityȱ matchingȱ couldȱ beȱ
integratedȱ intoȱ theȱ ICPȱ methodology,ȱ asȱ wasȱ plannedȱ forȱ allȱ otherȱ computerȬ
basedȱcoreȱtaxȱadministrationȱsystems.ȱInȱaddition,ȱtheȱTaxȱOfficeȱanticipatedȱ
thatȱtheȱidentityȱmatchingȱcapabilityȱwouldȱrequireȱgreaterȱflexibilityȱinȱfutureȱ
yearsȱasȱadditionalȱthirdȱpartyȱdataȱsetsȱwereȱaddedȱtoȱtheȱcapabilityȱandȱnewȱ
services,ȱbasedȱonȱenhancedȱidentityȱmatching,ȱwouldȱbeȱrequired.ȱȱ
3.35 Atȱ theȱ timeȱ thatȱ theȱ Taxȱ Officeȱ wasȱ determiningȱ thisȱ strategy,ȱ theȱ
Governmentȱ announcedȱ reformsȱ toȱ superannuationȱ whichȱ required,ȱ amongstȱ
otherȱthings,ȱthatȱtheȱTaxȱOfficeȱexpandȱitsȱapproachȱtoȱfindingȱlostȱmembersȱ
ofȱ superannuationȱ fundsȱ andȱ improveȱ theȱ integrityȱ ofȱ theȱ administrationȱ ofȱ
superannuation.ȱ Asȱ superannuationȱ administrationȱ wasȱ beingȱ integratedȱ intoȱ
theȱECMP,ȱtheȱTaxȱOfficeȱdecidedȱtoȱleverageȱoffȱtheȱopportunityȱandȱdevelopȱ
theȱnewȱapproachȱtoȱidentityȱmatchingȱinȱtheȱSuperannuationȱBusinessȱLineȱinȱ
theȱfirstȱinstance.ȱȱ
3.36 Theȱ Taxȱ Office’sȱ existingȱ identityȱ matchingȱ facilityȱ requiredȱ
enhancementȱtoȱsupportȱtheȱidentificationȱandȱnotificationȱofȱAustraliansȱwithȱ
superannuationȱ fundȱ accountsȱ ofȱ whichȱ theyȱ wereȱ unaware.ȱ Theȱ Taxȱ Officeȱ
soughtȱaȱgeneralȱidentityȱmatchingȱfacilityȱthatȱcouldȱsatisfyȱtheȱspecificȱneedsȱ
ofȱ theȱ Lostȱ Membersȱ Registerȱ andȱ thenȱ beȱ extendedȱ toȱ supportȱ incomeȱ taxȱ
administrationȱ inȱ theȱ future.ȱ Theȱ Taxȱ Officeȱ wasȱ hopefulȱ commercialȱ
offȬtheȬshelfȱ identityȱ matchingȱ softwareȱ inȱ theȱ marketplaceȱ wouldȱ meetȱ itsȱ
needs.ȱ However,ȱ theȱ Taxȱ Office’sȱ evaluationȱ ofȱ theȱ tendersȱ submittedȱ
concludedȱ noneȱ ofȱ theȱ productsȱ submittedȱ significantlyȱ orȱ clearlyȱ offeredȱ theȱ
potentialȱ forȱ exceedingȱ theȱ outcomesȱ obtainedȱ withȱ theȱ currentȱ Taxȱ Officeȱ
identityȱmatchingȱfacility.ȱAsȱaȱresult,ȱtheȱTaxȱOfficeȱisȱproceedingȱinternallyȱtoȱ
addȱ toȱ theȱ currentȱ identityȱ matchingȱ facility. 61 ȱ Theseȱ enhancementsȱ willȱ beȱ
usedȱinȱtheȱICP.ȱȱ
3.37 Accordingȱ toȱ theȱ Taxȱ Office,ȱ theȱ newȱ identityȱ matchingȱ softwareȱ willȱ
augmentȱtheȱexistingȱidentityȱmatchingȱsystemȱonȱwhichȱallȱTaxȱOfficeȱidentityȱ
matchingȱnowȱtakesȱplace.ȱ
61
The ANAO understands the Tax Office may again seek tenders, in a few years time, for identity matching
facilities to enhance or replace the software now being developed.

68
3.38 TheȱnewȱidentityȱmatchingȱsoftwareȱtheȱTaxȱOfficeȱisȱnowȱdevelopingȱ
willȱ not,ȱ however,ȱ includeȱ aȱ negativeȱ searchȱ facility.ȱ Evenȱ thoughȱ theȱ Taxȱ
Officeȱ identifiedȱ thisȱ asȱ aȱ highlyȱ desirableȱ featureȱ ofȱ theȱ requiredȱ identityȱ
matchingȱfunctionality,ȱtheȱTaxȱOfficeȱdecidedȱthatȱinȱtheȱabsenceȱofȱaȱsuitableȱ
offȬtheȬshelfȱnegativeȱsearchȱfacility,ȱitȱwouldȱonlyȱproceed,ȱatȱthisȱstage,ȱwithȱ
theȱinternalȱdesignȱofȱmandatory,ȱnotȱhighlyȱdesirable,ȱfeatures.ȱȱ
Scope for further improvement to the Tax Office’s identity matching
3.39 Theȱ ANAOȱ consideredȱ thereȱ isȱ scopeȱ toȱ improveȱ theȱ efficiencyȱ andȱ
effectivenessȱ ofȱ theȱ currentȱ generalȱ purposeȱ identityȱ matchingȱ facilities.ȱ Theȱ
ANAOȱ consideredȱ nonȬindividualȱ identityȱ matching,ȱ especiallyȱ inȱ relationȱ toȱ
trusts,ȱcompaniesȱandȱsuperannuationȱfundsȱcouldȱbeȱimprovedȱconsiderably.ȱ
Thereȱisȱalsoȱscopeȱtoȱimproveȱindividualȱidentityȱmatchingȱthroughȱincludingȱ
additionalȱ cascadingȱ routinesȱ andȱ improvedȱ useȱ ofȱ archivedȱ addresses.ȱ Inȱ
addition,ȱthereȱmayȱbeȱscopeȱtoȱmakeȱimportantȱimprovementsȱtoȱtheȱidentityȱ
matchingȱfacilityȱbyȱcloserȱworkingȱrelationshipsȱbetweenȱtheȱanalyticsȱgroupȱ
inȱ theȱ CKO’sȱ businessȱ lineȱ andȱ theȱ Clientȱ Identificationȱ Complianceȱ
DirectorateȱinȱtheȱME&Iȱbusinessȱline.ȱImplementationȱofȱtheseȱimprovementsȱ
could,ȱ amongȱ otherȱ things,ȱ ensureȱ theȱ betterȱ useȱ ofȱ availableȱ data,ȱ especiallyȱ
legislatedȱdata.ȱ
3.40 Theȱ provisionȱ ofȱ onȬline,ȱ webȬbasedȱ services,ȱ suchȱ asȱ preȬfilling,ȱ
requiresȱ veryȱ highȱ qualityȱ data.ȱ Aȱ negativeȱ searchȱ facilityȱ canȱ improveȱ theȱ
qualityȱofȱdataȱbyȱgivingȱassuranceȱthatȱanȱindividualȱdoesȱnotȱexitsȱonȱaȱdataȱ
base.ȱ Inȱ addition,ȱ theȱ needȱ forȱ aȱ negativeȱ searchȱ facilityȱ inȱ theȱ Taxȱ Office’sȱ
generalȱpurposeȱidentityȱmatchingȱsoftwareȱhadȱbeenȱestablished.ȱTheȱfurtherȱ
considerationȱ ofȱ theȱ benefitsȱ ofȱ bringingȱ theȱ negativeȱ searchȱ prototypeȱ intoȱ
production,ȱ givenȱ theȱ presentȱ hiatus,ȱ isȱ warranted.ȱ Furtherȱ considerationȱ ofȱ
adaptingȱ theȱ prototypeȱ toȱ satisfyȱ theȱ requirementsȱ ofȱ theȱ Superannuationȱ
BusinessȱLineȱisȱalsoȱwarranted.ȱTheȱANAOȱnotedȱthatȱtheȱmoreȱwideȱspreadȱ
useȱ ofȱ aȱ negativeȱ searchȱ facilityȱ inȱ taxȱ administrationȱ requiresȱ moreȱ researchȱ
andȱdevelopment.ȱȱ
Recommendation No.2
3.41 TheȱANAOȱrecommendsȱthatȱinȱorderȱtoȱachieveȱadditionalȱefficienciesȱ
toȱtaxȱadministrationȱandȱimproveȱtheȱintegrityȱofȱkeyȱtaxȱdataȱbases,ȱtheȱTaxȱ
OfficeȱimproveȱnonȬindividualȱidentityȱmatching,ȱgiveȱfurtherȱconsiderationȱtoȱ
theȱnegativeȱsearchȱproofȬofȬconceptȱfacilityȱandȱcontinueȱtoȱreviewȱoptionsȱtoȱ
improveȱitsȱkeyȱidentityȱmatchingȱfacility.ȱȱ

69
3.42 ATOȱ Response:ȱ Agreed.ȱ Theȱ Taxȱ Officeȱ willȱ continueȱ toȱ lookȱ atȱ
opportunitiesȱ toȱ improveȱ itsȱ identityȱ matchingȱ capabilityȱ inȱ respectȱ ofȱ bothȱ
individualȱ andȱ nonȬindividualȱ taxpayers.ȱ Costȱ benefitȱ considerationsȱ haveȱ
precludedȱ theȱ developmentȱ ofȱ aȱ negativeȱ searchȱ facility.ȱ Theȱ Taxȱ Officeȱ willȱ
continueȱ toȱ reviewȱ theȱnegativeȱ searchȱ proofȱ ofȱ conceptȱ asȱnewȱ softwareȱ andȱ
technologyȱimprovementsȱandȱresourcesȱbecomeȱavailable.ȱȱ
The Australian Taxation Office’s matching system

3.43 Theȱ Australianȱ Taxȱ Office’sȱ matchingȱ systemȱ (ATOms)ȱ automaticallyȱ
matchesȱ dataȱ fromȱ legislatedȱ dataȱ sourcesȱ againstȱ dataȱ taxpayersȱ provideȱ
directlyȱtoȱtheȱTaxȱOffice. 62 ȱATOmsȱdetectsȱdiscrepanciesȱinȱstatedȱincome,ȱandȱ
producesȱ aȱ poolȱ ofȱ casesȱ thatȱ mayȱ beȱ selectedȱ forȱ complianceȱ activity.ȱ Withȱ
implementationȱofȱtheȱECMPȱChangeȱProgram,ȱtheȱTaxȱOfficeȱwillȱprogressivelyȱ
replaceȱaȱnumberȱofȱtheȱsystemsȱthatȱcompriseȱATOms,ȱandȱcaseȱanalysisȱandȱ
selectionȱwillȱbeȱmadeȱusingȱoperationalȱanalytics.ȱ
3.44 Processingȱstatisticsȱandȱamountsȱofȱadditionalȱrevenueȱcollectedȱfromȱ
automatedȱdataȱmatchingȱareȱcollatedȱandȱinȱsomeȱyearsȱhaveȱbeenȱpublishedȱ
inȱ theȱ Taxȱ Office’sȱ annualȱ complianceȱ programȱ report.ȱ Tableȱ 3.1ȱ providesȱ
detailsȱofȱtheȱTaxȱOffice’sȱautomatedȱdataȱmatchingȱusingȱATOmsȱforȱtheȱlastȱ
threeȱavailableȱfinancialȱyearsȱ(detailsȱforȱ2006–07ȱareȱnotȱyetȱavailable).ȱȱ
62
ATOms refers to a number of systems, including the Information Matching Analysis and Selection, Case
Actioning System and Compliance Online Enquiry and Amendment System.

70
Table 3.1
Automated data matching using legislated data sources
Automated data matching using the
2003–04 2004–05 2005–06
income matching system
Annual Investment Income Report and Dividend and
Interest Schedule data
- Number of individuals identity matched 10,364,485 10,674,374 10,609,227

- Number of individuals identity matched at a high level of 9,168,898 9,498,095 9,426,953
confidence
- Number of individuals subject to income matching as a tax 6,834,851 7,079,577 6,977,535
return had been lodged
- Liabilities raised ($ millions) $45.6 $66.5 $29.3
(to 7 Feb 08)
Pay-As-You-Go (PAYG) data
(e.g. salary, lump sums, fringe benefits)

confidence
(to 7 Feb 08)
Centrelink data
(e.g. various benefits and allowances, pensions)

confidence
(to 7 Feb 08)
Medicare Australia
(e.g. private health insurance premiums, Medicare levy
surcharge data)

confidence
- Number of individuals subject to income matching as a tax 53,370 59,378 Not yet
return had been lodged available
- Number of potentially discrepant cases 53,370 59378
- Number of discrepant cases selected for actioning 50,463 52,380 Not yet
- Liabilities raised ($ millions) $24.6 $30.7 available
Notes:
(a) The ‘Number of individuals identity matched’ is the number of individuals identity matched to high,
medium or low levels of confidence, not the total number of data records for those individuals. To obtain
this figure, data records received were sorted to produce a count of unique TFNs. This produced a
count of individuals that can be aligned with the statistics for cases actioned.

71
(b) The ‘Number of individuals identity matched at a high level of confidence’ is the number of matched
individuals whose data records passed established criteria that allow them to be used with confidence
in automated processes that identify potential discrepancies between income reported to the Tax Office
by third parties and that declared within the individual’s tax return.
(c) The ‘Number of individuals subject to income matching as a tax return had been lodged’ does not
include those individuals whose income details have been reported, but have no obligation to lodge a
tax return.
(d) The ‘Number of potentially discrepant cases’ are those where a potential income discrepancy has been
detected.
(e) The ‘Number of discrepant cases selected for actioning’ is the number of cases that were actioned from
the pool of potential cases for actioning, because the amount of the discrepancy was above nominated
thresholds.
(f) AIIR data statistics also include statistics for Dividend & Interest Reports under Subsection 161A (1)
ITAA36 and Sections 388-50 TAA53.
(g) All of the figures within the table are derived from data for discrete financial years, so that the figures for
identity matching outcomes, discrepant cases actioned and liabilities raised all relate to that same
year's data.
(h) Statistics provided represent a snapshot in time and some may change slightly as new data is received
or further tax returns are lodged. The number of potentially discrepant cases may change as some data
from third-party reporters is identified as incorrect or of poor quality and is rejected then replaced, as
poor data may have been the cause of some of these potential cases.
Source: Tax Office.
3.45 Anotherȱ incomeȱ streamȱ forȱ whichȱ theȱ Taxȱ Officeȱ conductsȱ dataȱ
matchingȱ isȱ foreignȱ sourcedȱ income.ȱ Tableȱ 3.2ȱ providesȱ detailsȱ ofȱ theȱ Taxȱ
Office’sȱ foreignȱ sourcedȱ incomeȱ dataȱ matchingȱ forȱ theȱ lastȱ fourȱ operationalȱ
years.ȱ
Table 3.2
Data matching using data on foreign sourced income
Data from Tax Treaty Partners 2003–04 2004–05 2005–06 2006–07
FIR data (e.g. foreign income)
- No. of records matched 95,395 91,137 164,779 121,273
- No. of discrepant cases actioned 1,171 1,568 1,212 1,800
- Liabilities raised ($ ) 3,002,988 1,452,596 2,053,364 1,222,540
Notes:
(a) These statistics are based on operational years and represent work effort, as data is often received from
tax treaty partners in multi-year lots that refer to various Australian operational years.
(b) These identity matches may be to a high, medium or low confidence level
(c) Statistics are for ME&I business line only
Source: Tax Office
3.46 DataȱfromȱlegislatedȱsourcesȱisȱalsoȱavailableȱtoȱauthorisedȱTaxȱOfficersȱ
fromȱallȱbusinessȱlines,ȱforȱuseȱinȱvariousȱtaxȱadministrationȱactivitiesȱsuchȱasȱ
audit,ȱ dataȱ miningȱ andȱ analytics.ȱ Statisticsȱ andȱ resultsȱ fromȱ thisȱ useȱ ofȱ
legislatedȱdataȱareȱnotȱconsolidatedȱorȱreportedȱcorporately.ȱ

72
Australian Transaction Reports and Analysis Centre data

3.47 Australianȱ Transactionȱ Reportsȱ andȱ Analysisȱ Centreȱ (AUSTRAC)ȱ dataȱ
representsȱaȱfurtherȱsourceȱofȱdataȱtoȱaugmentȱtheȱTaxȱOffice’sȱdataȱholdings.ȱ
Authorisedȱ Taxȱ Officersȱ haveȱ onlineȱ accessȱ toȱ theȱ AUSTRACȱ database.ȱ Thisȱ
enablesȱselectedȱsearchingȱofȱtheȱdatabaseȱtoȱobtainȱinformationȱthatȱisȱrelevantȱ
toȱ aȱ case.ȱ Theȱ Taxȱ Officeȱ (andȱ theȱ Privacyȱ Commissioner)ȱ doesȱ notȱ considerȱ
thisȱaccessȱtoȱbeȱdataȱmatching,ȱasȱitȱisȱnotȱ‘theȱcomputerisedȱcomparisonȱofȱtwoȱorȱ
moreȱ databasesȱ orȱ extracts’ȱ (Privacyȱ Commissionerȱ Guidelinesȱ paragraph.ȱ 15.1),ȱ
ratherȱ itȱ isȱ theȱ identificationȱ ofȱ relevantȱ informationȱ viaȱ aȱ oneȬtoȬoneȱ
comparisonȱ ofȱ recordsȱ withȱ commonȱ identifiers.ȱ Resultsȱ ofȱ theseȱ searchesȱ areȱ
publishedȱinȱtheȱTaxȱOffice’sȱAnnualȱReport.ȱ
3.48 Theȱ memorandumȱ ofȱ understandingȱ betweenȱ AUSTRACȱ andȱ theȱ Taxȱ
Officeȱ allowsȱ forȱ AUSTRACȱ toȱ provideȱ theȱ Taxȱ Officeȱ withȱ bulkȱ datasetsȱ forȱ
dataȱ matching. 63 ȱ Toȱ implementȱ Recommendationȱ No.6ȱ ofȱ Auditȱ reportȱ No.47ȱ
2004–05,ȱ Australianȱ Taxationȱ Officeȱ Taxȱ Fileȱ Numberȱ Integrity,ȱ theȱ Taxȱ Office’sȱ
Seriousȱ Nonȱ Complianceȱ businessȱ lineȱ hasȱ initiatedȱ anȱ ‘AUSTRACȱ dataȱ
matchingȱ project’.ȱ Theȱ purposeȱ ofȱ thisȱ projectȱ isȱ toȱ determineȱ theȱ extentȱ toȱ
whichȱitȱisȱpossibleȱtoȱreliablyȱattachȱTFNsȱtoȱAUSTRACȱreportsȱbyȱmatchingȱ
AUSTRACȱdataȱwithȱTaxȱOfficeȱclientȱdata.ȱThisȱprojectȱhasȱreceivedȱtwoȱbulkȱ
datasetsȱ fromȱ AUSTRAC,ȱ andȱ isȱ exploringȱ optionsȱ toȱ improveȱ identityȱ
matching.ȱAmongȱotherȱoptions,ȱtheȱprojectȱplansȱtoȱuseȱdataȱfromȱTaxȱOfficeȱ
datasetsȱ (suchȱ asȱ bankȱ accountȱ recordsȱ fromȱ AIIR,ȱ orȱ relevantȱ personalȱ
identificationȱandȱfinancialȱinstitutionȱdetailsȱinȱotherȱdatabases)ȱtoȱattemptȱtoȱ
matchȱaȱTFNȱtoȱAUSTRACȱrecords.ȱȱ
3.49 Taxȱ Officeȱ dataȱ miningȱ ofȱ AUSTRACȱ dataȱ occursȱ withinȱ theȱ analyticsȱ
areaȱofȱtheȱOCKO.ȱFollowingȱaȱsuccessfulȱtrial,ȱanȱAUSTRACȱdataȱminerȱhasȱ
beenȱ permanentlyȱ secondedȱ toȱ theȱ Taxȱ Officeȱ inȱ theȱ analyticsȱ area.ȱ Specificȱ
dataȱ miningȱ projectsȱ thatȱ usedȱ AUSTRACȱ dataȱ includeȱ theȱ Operationȱ
Wickenby,ȱ Highȱ Riskȱ Refunds,ȱ andȱ Taxȱ Havensȱ projects.ȱ Theseȱ dataȱ miningȱ
projectsȱ haveȱ alsoȱ experiencedȱ difficultiesȱ inȱ obtainingȱ highȱ qualityȱ TFNȱ
matches.ȱ Asȱ aȱ result,ȱ additionalȱ techniquesȱ toȱ improveȱ identityȱ matchingȱ areȱ
beingȱinvestigated.ȱȱ
63
Memorandum of Understanding between the Director, Australian Transaction Reports and Analysis
Centre and the Commissioner of Taxation on access to and use of Australian Transaction Reports and
Analysis Centre Data, 2003.

73
3.50 Whileȱ theȱ AUSTRACȱ identityȱ matchingȱ projectȱ andȱ theȱ teamȱ inȱ theȱ
OCKOȱ haveȱ interacted,ȱ theȱ ANAOȱ considersȱ thatȱ additionalȱ synergiesȱ andȱ
efficienciesȱmayȱbeȱachievedȱthroughȱcloserȱintegrationȱofȱtheȱtwoȱteams.ȱ
3.51 Theȱ Taxȱ Officeȱ advisedȱ thatȱ aȱ reviewȱ ofȱ theȱ Taxȱ Office’sȱ useȱ ofȱ
AUSTRACȱdataȱhasȱbeenȱestablishedȱandȱthatȱtheȱpurposeȱofȱtheȱreviewȱisȱtoȱ
identifyȱ howȱ theȱ Taxȱ Officeȱ canȱ makeȱ bestȱ useȱ ofȱ AUSTRACȱ inȱ theȱ futureȱ
environment.ȱ Theȱ Taxȱ Officeȱ furtherȱ advisedȱ thatȱ theȱ scopeȱ ofȱ theȱ reviewȱ
includesȱtheȱfollowing:ȱ
x Engageȱotherȱbusinessȱlinesȱinȱthisȱreviewȱby:ȱ
consultingȱwithȱtheȱOCKO;ȱ
consultingȱ withȱ identifiedȱ stakeholdersȱ toȱ determineȱ theirȱ
businessȱrequirements;ȱandȱ
seekingȱbusinessȱlinesȱresourcesȱandȱcommitmentȱtoȱtheȱreview.ȱ
x Identifyȱ howȱ theȱ Taxȱ Officeȱ canȱ bestȱ optimiseȱ theȱ useȱ ofȱ currentȱ
AUSTRACȱ dataȱ asȱ wellȱ asȱ exploringȱ (ifȱ possible)ȱ howȱ toȱ useȱ theȱ newȱ
AUSTRACȱdataȱresultingȱfromȱtheȱAML/CTFȱActȱreformsȱby:ȱ
gainingȱanȱunderstandingȱofȱwhatȱAUSTRACȱdataȱcontainsȱandȱ
willȱcontainȱunderȱtheȱreforms;ȱ
determiningȱ howȱ AUSTRACȱ dataȱ canȱ addȱ valueȱ toȱ Taxȱ Officeȱ
intelligence;ȱ
discoveringȱ theȱ differentȱ categoriesȱ ofȱ productsȱ availableȱ fromȱ
AUSTRACȱnowȱandȱintoȱtheȱfuture;ȱandȱ
confirmingȱbusinessȱlineȱrequirementsȱforȱAUSTRACȱdata.ȱ
x Identifyȱ theȱ requiredȱ directionȱ forȱ optimisingȱ theȱ useȱ ofȱ AUSTRACȱ
dataȱ byȱ theȱ Taxȱ Officeȱ inȱ theȱ future,ȱ includingȱ theȱ developmentȱ ofȱ
guidingȱprinciplesȱand/orȱparametersȱforȱfutureȱuseȱofȱAUSTRACȱdataȱ
andȱintegrationȱofȱtheȱintelligenceȱgainedȱfromȱtheȱAUSTRACȱdataȱintoȱ
appropriateȱbusinessȱlineȱactivities.ȱ
x InfluenceȱtheȱAUSTRACȱreviewȱby:ȱ
participatingȱ inȱ theȱ AUSTRACȱ reviewȱ toȱ gainȱ knowledgeȱ ofȱ
whatȱ AUSTRACȱ systemsȱ canȱ orȱ shouldȱ provideȱ (thisȱ willȱ
includeȱidentifyingȱanyȱcurrentȱpositivesȱand/orȱshortcomings);ȱ

74
Basedȱonȱbusinessȱlineȱrequirements,ȱadvisingȱAUSTRACȱofȱTaxȱ
Officeȱ futureȱ needsȱ (acknowledgingȱ thatȱ thisȱ willȱ probablyȱ
dependȱ onȱ theȱ resources,ȱ timeȱ andȱ expertiseȱ availableȱ toȱ
AUSTRAC).ȱ
3.52 Theȱdesiredȱoutcomesȱfromȱtheȱreviewȱwillȱbe:ȱ
x aȱstrengthenedȱrelationshipsȱbetweenȱAUSTRACȱandȱtheȱTaxȱOfficeȱasȱ
businessȱintentȱisȱsharedȱandȱunderstood;ȱ
x anȱoptimumȱuseȱofȱAUSTRACȱdataȱacrossȱtheȱTaxȱOffice;ȱ
x aȱmoreȱstrategicȱandȱholisticȱuseȱofȱAUSTRACȱdata;ȱ
x anȱ embeddedȱ practiceȱ ofȱ usingȱ AUSTRACȱ dataȱ inȱ ‘businessȱ asȱ usual’ȱ
processes,ȱincludingȱbulkȱdataȱmatchingȱactivities;ȱandȱ
x aȱ reviewȱ onȱ existingȱ measuresȱ andȱ aȱ developmentȱ forȱ newȱ onesȱ (ifȱ
necessary).ȱ
Memoranda of understanding data

3.53 Theȱ Taxȱ Officeȱ routinelyȱ receivesȱ datasetsȱ fromȱ Australianȱ Securitiesȱ
andȱ Investmentsȱ Commissionȱ (ASIC)ȱ andȱ Stateȱ Revenueȱ Officesȱ underȱ
memorandaȱofȱunderstanding.ȱȱ
3.54 ASICȱ dataȱ providedȱ toȱ theȱ Taxȱ Officeȱ relatesȱ toȱ licensedȱ investmentȱ
advisersȱ andȱ securityȱ dealers,ȱ andȱ theirȱ representatives,ȱ includingȱ anyȱ
relationshipsȱorȱrolesȱtheyȱhaveȱwithȱAustralianȱcompanies.ȱItȱisȱusedȱtoȱhelpȱ
theȱ Taxȱ Officeȱ reviewȱ taxȱ complianceȱ ofȱ investmentȱ advisersȱ andȱ securitiesȱ
dealers,ȱandȱtheirȱrepresentatives,ȱlicensedȱbyȱASICȱasȱwellȱasȱidentifyȱanyȱnonȱ
complianceȱissues.ȱ
3.55 Aȱ memorandumȱ ofȱunderstandingȱprovidesȱ theȱ formalȱ frameworkȱ forȱ
exchangingȱconfidentialȱinformationȱandȱotherȱaspectsȱofȱcooperationȱbetweenȱ
theȱ Taxȱ Officeȱ andȱ participatingȱ Stateȱ andȱ Territoryȱ revenueȱ offices.ȱ Inȱ 2004,ȱ
theȱ Taxȱ Officeȱ initiatedȱ aȱ capitalȱ gainsȱ taxȱ projectȱ focusingȱ onȱ acquiringȱ realȱ
propertyȱdataȱtoȱhelpȱadministerȱAustralianȱtaxationȱlaw.ȱMoreȱinformationȱonȱ
thisȱprojectȱisȱavailableȱinȱAuditȱReportȱNo.16ȱ2006–07,ȱAdministrationȱofȱCapitalȱ
GainsȱTaxȱComplianceȱinȱtheȱIndividualsȱMarketȱSegment.ȱ
3.56 Auditȱ Reportȱ No.16ȱ 2006–07ȱ notedȱ aȱ rangeȱ ofȱ difficultiesȱ associatedȱ
withȱtheȱTaxȱOffice’sȱuseȱofȱrealȱpropertyȱdataȱprovidedȱbyȱstateȱgovernmentȱ

75
authorities. 64 ȱTheȱANAOȱnotesȱtheȱTaxȱOfficeȱisȱtakingȱactionȱonȱtheseȱmattersȱ
andȱnowȱreceivesȱrealȱpropertyȱdataȱfromȱallȱrelevantȱstateȱauthorities.ȱTheȱTaxȱ
Officeȱ advisedȱ thatȱ allȱ stateȱ authoritiesȱ nowȱ provideȱ propertyȱ dataȱ ofȱ highȱ
qualityȱ readyȱ forȱ useȱ whichȱ isȱ updatedȱ onȱ aȱ regularȱ basis.ȱ Theseȱ datasetsȱ areȱ
crucialȱinȱachievingȱimprovedȱlevelsȱofȱcapitalȱgainsȱtaxȱcompliance,ȱasȱwellȱasȱ
GSTȱandȱotherȱtaxes.ȱȱ
Purchased data
3.57 TheȱTaxȱOffice’sȱbusinessȱlinesȱmayȱpurchaseȱdatasetsȱfromȱcommercialȱ
providersȱforȱuseȱinȱauditȱandȱotherȱactivities.ȱIfȱtheȱpurchasedȱdataȱhasȱbeenȱ
obtainedȱforȱdataȱmatchingȱpurposes,ȱtheȱpurchasedȱdatasetsȱareȱrecordedȱonȱ
theȱdataȱmatchingȱregister.ȱIfȱdataȱhasȱbeenȱpurchasedȱforȱotherȱpurposes,ȱitȱisȱ
notȱsubjectȱtoȱtheȱprivacyȱguidelinesȱandȱisȱnotȱrequiredȱtoȱbeȱonȱtheȱregister.ȱ
3.58 TheȱTaxȱOfficeȱpurchasesȱtwoȱmainȱdataȱsets,ȱfactȱofȱdeathȱandȱelectoralȱ
officeȱdataȱsets.ȱTheȱTaxȱOfficeȱusesȱbothȱtoȱupdateȱandȱmaintainȱtheȱintegrityȱ
ofȱclientȱregisters.ȱTheseȱupdatesȱoccurȱonȱaȱmonthlyȱbasis.ȱTableȱ3.3ȱprovidesȱ
theȱ numbersȱ ofȱ updatesȱ toȱ theȱ Taxȱ Office’sȱ clientȱ registersȱ asȱ aȱ resultȱ ofȱ
administrativeȱmatching.ȱ
Table 3.3
Administrative matching of purchased data to update client registers
2005–06 2006–07
No. of Records No. of No. of Records No. of
records matched to updates records matched to updates
Data set processed a TFN made to processed a TFN made to
through client register through client
identity identity register
matching matching
engine engine
Electoral Roll 26,340,732 98.1% Not 53,060,530 98.2% Not
applicable applicable
Fact of Death 125,211 91.5% 108,198 141,257 92.0% 108,962
Notes:
(a) The identity matches to a TFN may be achieved at a high, medium, or low confidence level.
(b) The updates made to the register from Fact of Death data occurred as a result of high quality matches
only.
(c) The Tax Office investigates reasons for low and medium confidence level matches.
Source: Tax Office.
64
See Audit Report No.16 2006–2007 Administration of Capital Gains Tax Compliance in the Individuals
Market Segment paragraph 3.29 p. 57.

76
Requisitioned data
3.59 Tableȱ 3.4ȱ showsȱ theȱ numberȱ ofȱ theȱ Taxȱ Office’sȱ adȱ hocȱ dataȱ matchingȱ
projectsȱ (usingȱ requisitionedȱ data)ȱ sinceȱ establishmentȱ ofȱ theȱ DMSCȱ inȱȱ
2003–04.ȱ Resultsȱ fromȱ theseȱ dataȱ matchingȱ projectsȱ areȱ notȱ consolidatedȱ andȱ
reportedȱcorporately.ȱȱ
Table 3.4
Data matching projects using requisitioned data
Ad hoc data matching projects 2003–04 2004–05 2005–06 2006–07
New Projects Registered with the Gatekeeper 70 49 45 18
Suspended or Cancelled Projects 18 17 13 -
Completed Projects 52 20 16 7
DMSC Evaluations of Projects 20 14 7 -
Work-in-Progress Evaluations 1
Project Closure Evaluations *13
Notes:
(a) The Data Matching Register was first introduced in early 2005. The 2003–04 figures represent, in some
respects, historical information about projects which had already been completed. As such, information
about projects which may have been commenced during 2002–03 is also included. The 2004–05 figures
are somewhat more accurate but, again, some of these projects were already finalised before they were
registered.
(b) Project Closure Evaluations include final evaluations provided to the Privacy Commissioner in respect of
Para. 76 of the Data Matching Guidelines.
(*) 13 of the 14 evaluations required in accordance with Para. 76 of the Data Matching Guidelines have
been conducted. At this stage there is no requirement to conduct evaluation for any subsequent year
projects.
Source: Tax Office
3.60 TheȱTaxȱOfficeȱadvisedȱthatȱitȱdoesȱnotȱprescribeȱbenchmarkȱmeasuresȱ
forȱ dataȱ matchingȱ processes.ȱ Eachȱ situationȱ isȱ consideredȱ basedȱ onȱ theȱ
circumstancesȱ appropriateȱ inȱ thatȱ situation.ȱ Theseȱ decisionsȱ areȱ takenȱ byȱ theȱ
riskȱ ownerȱ andȱ willȱ takeȱ intoȱ considerationȱ aȱ rangeȱ ofȱ factorsȱ relevantȱ toȱ
decisionsȱ toȱ proceed,ȱ moderateȱ orȱ ceaseȱ furtherȱ work.ȱ Theseȱ decisionsȱ canȱ
changeȱ asȱ informationȱ availableȱ changesȱ duringȱ theȱ year,ȱ forȱ exampleȱ aȱ newȱ
policyȱimperative.ȱTheȱANAOȱraisedȱasȱaȱmatterȱforȱconsiderationȱbyȱtheȱTaxȱ
Officeȱ whetherȱ itȱ mayȱ notȱ beȱ beneficialȱ toȱ provideȱ genericȱ guidanceȱ toȱ staffȱ
aboutȱ specificȱ complianceȱ improvementsȱ suchȱ asȱ anȱ increaseȱ inȱ voluntaryȱ
complianceȱ inȱ aȱ nominatedȱ area;ȱ aȱ specificȱ measureȱ ofȱ riskȱ amelioration;ȱ aȱ
nominatedȱ proportionȱ ofȱ additionalȱ revenueȱ toȱ beȱ raised;ȱ orȱ improvedȱ strikeȱ
ratesȱrequired,ȱtoȱbeȱachievedȱfromȱtheȱproposedȱuseȱofȱtheȱrequisitionȱdataȱtoȱ
beȱacquired.ȱ

77
Analytics
3.61 Inȱ generalȱ terms,ȱ theȱ purposeȱ ofȱ analyticsȱ isȱ toȱ discoverȱ andȱ modelȱ
relationshipsȱ andȱ patternsȱ relevantȱ withinȱ andȱ betweenȱ variablesȱ inȱ largeȱ
volumesȱofȱdataȱrelevantȱtoȱtaxȱadministration.ȱAnalyticsȱisȱaȱbroadlyȱdefinedȱ
familyȱ ofȱ sophisticatedȱ methodologiesȱ whichȱ includeȱ dataȱ mining,ȱ dataȱ
linking,ȱdataȱmodelling,ȱandȱexpertȱbusinessȱrules.ȱTheȱmethodologiesȱmayȱuseȱ
advancedȱ mathematicsȱ andȱ statisticsȱ inȱ theȱ algorithmsȱ ofȱ whichȱ theyȱ areȱ
composed.ȱTheȱmethodologiesȱmayȱrequireȱconsiderableȱcomputerȱpowerȱandȱ
substantialȱ volumesȱ ofȱ dataȱ toȱ generateȱ resultsȱ usefulȱ toȱ taxȱ administration.ȱ
Theyȱ mayȱ beȱ basedȱ onȱ aȱ detailedȱ understandingȱ acquiredȱ byȱ otherȱ meansȱ ofȱ
patternsȱ ofȱ activityȱ inȱ theȱ data,ȱ includingȱ thatȱ whichȱ willȱ beȱ subjectȱ toȱ theȱ
methodologiesȱofȱanalytics.ȱȱ
3.62 Anȱ analyticsȱ projectȱ mayȱ beȱ descriptiveȱ inȱ thatȱ itȱ mayȱ describeȱ
relationshipsȱ thatȱ mightȱ notȱ otherwiseȱ haveȱ beenȱ detected.ȱ Itȱ mayȱ beȱ
inferentialȱ inȱ thatȱ itȱ generatesȱ hypothesesȱ aboutȱ relationshipsȱ relevantȱ toȱ taxȱ
administration,ȱincludingȱindicationsȱofȱnewȱrisks.ȱItȱmayȱbeȱpredictiveȱinȱthatȱ
itȱpredictsȱlikelyȱtaxȬrelevantȱbehaviourȱbasedȱonȱcharacteristicsȱinȱtheȱdata.ȱItȱ
mayȱ beȱ decisionȬorientedȱ inȱ thatȱ itȱ canȱ beȱ usedȱ toȱ makeȱ administrativeȱ
decisionsȱ suchȱ asȱ caseȱ selection,ȱ relatedȱ to,ȱ forȱ example,ȱ refunds,ȱ debt,ȱ
lodgementȱorȱassessment.ȱȱ
3.63 Analyticsȱprojectsȱmayȱuseȱanyȱorȱallȱofȱtheȱsixȱcategoriesȱofȱdataȱshownȱ
inȱ Figureȱ 1.1.ȱ However,ȱ analyticsȱ projectsȱ mayȱ useȱ requisitionedȱ dataȱ
(containingȱ personalȱ informationȱ aboutȱ individuals)ȱ onlyȱ ifȱ theȱ protocolȱ
approvedȱbyȱtheȱPrivacyȱCommissionerȱpermitsȱtheȱuseȱofȱtheȱdataȱinȱthisȱway.ȱ
3.64 TheȱTaxȱOffice’sȱCKOȱisȱresponsibleȱforȱtheȱadministrationȱofȱanalyticsȱ
projects.ȱTheȱCKOȱisȱresponsibleȱforȱdevelopingȱaȱcoherentȱvisionȱandȱstrategyȱ
forȱmanagingȱinformationȱinȱtheȱTaxȱOffice,ȱincludingȱbuildingȱorganisationalȱ
capabilityȱ inȱ theȱ areasȱ ofȱ strategicȱ intelligenceȱ andȱ analytics.ȱ Theȱ Corporateȱ
IntelligenceȱandȱRiskȱUnitȱhasȱbeenȱestablishedȱwithinȱtheȱCKOȱareaȱtoȱfocusȱ
onȱ enhancingȱ theȱ Taxȱ Office’sȱ organisationalȱ intelligenceȱ andȱ riskȱ capabilitiesȱ
asȱwellȱasȱdevelopingȱdataȱanalyticsȱtoȱinformȱriskȱprofiles.ȱAȱkeyȱpurposeȱofȱ
dataȱ analyticsȱ isȱ toȱ enableȱ theȱ Taxȱ Officeȱ toȱ provideȱ moreȱ personalisedȱ
productsȱandȱservicesȱtoȱclientsȱthroughȱbetterȱanalysisȱofȱtheȱTaxȱOfficeȱdataȱ
andȱinformation.ȱȱ
3.65 Appendixȱ 3ȱ summarisesȱ theȱ Taxȱ Office’sȱ analyticsȱ projectsȱ andȱ showsȱ
theȱwideȱrangeȱofȱthisȱactivity.ȱ

78
Data acquisition and quality

Acquisition
3.66 Anȱagency’sȱorganisationalȱarrangementsȱareȱnecessarilyȱaȱcompromiseȱ
betweenȱmanyȱdifferentȱandȱsometimesȱcompetingȱprioritiesȱandȱhaveȱaȱrangeȱ
ofȱ strengthsȱ andȱ weaknesses.ȱ ANAOȱ consideredȱ thatȱ thereȱ areȱ severalȱ risksȱ
associatedȱwithȱ currentȱarrangementsȱ thatȱ haveȱ aȱ bearingȱ onȱ dataȱ acquisitionȱ
andȱ mayȱ requireȱ closerȱ attention.ȱ Oneȱ riskȱ isȱ thatȱ aȱ businessȱ lineȱ focusȱ onȱ
businessȱ lineȱ prioritiesȱ couldȱ meanȱ thatȱ wholeȬofȬTaxȬOfficeȱ interestsȱ inȱ theȱ
availabilityȱ andȱ useȱ ofȱ dataȱ mightȱ notȱ beȱ optimallyȱ achieved.ȱ Anotherȱ isȱ thatȱ
theȱ betterȱ understandingȱ ofȱ theȱ detailȱ ofȱ theȱ risksȱ thatȱ initiallyȱ warrantedȱ theȱ
acquisitionȱofȱtheȱdataȱbyȱaȱbusinessȱlineȱmightȱnotȱbeȱfullyȱsharedȱwithȱotherȱ
businessȱ lines.ȱ Theȱ ANAOȱ consideredȱ thatȱ thisȱ riskȱ couldȱ beȱ managedȱ
satisfactorilyȱ ifȱ theȱ riskȱ ownerȱ whoȱ initiatedȱ theȱ acquisitionȱ ofȱ theȱ dataȱ (andȱ
thereforeȱ theȱ dataȱ matchingȱ andȱ analyticsȱ strategicȱ response)ȱ maintainsȱ aȱ
strongȱcorporateȱperspectiveȱthroughoutȱtheȱproject.ȱȱ
3.67 Theȱriskȱassociatedȱwithȱtheȱcorporateȱuseȱofȱdataȱacquiredȱbyȱbusinessȱ
linesȱ mayȱ requireȱ aȱ differentȱ approachȱ asȱ businessȱ lineȱ initiationȱ ofȱ theȱ
acquisitionȱ ofȱ requisitionedȱ dataȱ mayȱ notȱ beȱ theȱ optimumȱ wayȱ forȱ theȱ Taxȱ
Officeȱtoȱacquireȱcorporateȱdata.ȱȱ
3.68 Inȱ relationȱ toȱ requisitionedȱ data,ȱ aȱ rangeȱ ofȱ dataȱ managementȱ issuesȱ
mightȱ notȱ beȱ addressedȱ untilȱ afterȱ receiptȱ ofȱ data.ȱ Theseȱ issuesȱ includeȱ theȱ
timeliness,ȱqualityȱandȱusabilityȱofȱtheȱdata,ȱitsȱmanagementȱasȱaȱwholeȬofȬTaxȱ
Officeȱresource,ȱandȱidentificationȱofȱtheȱmostȱappropriateȱchannelȱbyȱwhichȱtoȱ
receiveȱ it.ȱ Inȱ addition,ȱ theȱ Taxȱ Officeȱ mayȱ findȱ thereȱ areȱ relativelyȱ longȱ leadȱ
timesȱbetweenȱidentifyingȱaȱbusinessȱlineȱcomplianceȱissueȱandȱavailabilityȱofȱ
theȱdataȱinȱaȱformȱthatȱcanȱbeȱusedȱforȱdataȱmatching.ȱȱ
3.69 Inȱrelationȱtoȱlegislatedȱdata,ȱtheȱANAOȱnotedȱthatȱtheȱTaxȱOfficeȱhasȱ
arrangementsȱ toȱ addressȱ theȱ issuesȱ ofȱ timeliness,ȱ qualityȱ andȱ usabilityȱ ofȱ theȱ
data,ȱandȱitsȱmanagementȱasȱaȱwholeȬofȬTaxȱOfficeȱresource.ȱInȱrelationȱtoȱoneȱ
setȱ ofȱ legislatedȱ data,ȱ theȱ AIIR,ȱ theȱ ANAOȱ examinedȱ theseȱ issues,ȱ amongstȱ
others,ȱ inȱ aȱ previousȱ report.65 ȱ Theȱ ANAOȱ hasȱ notȱ examinedȱ theȱ Taxȱ Office’sȱ
managementȱandȱuseȱofȱanyȱotherȱlegislatedȱdata.ȱȱ
65
Audit Report No.48 2003–04, The Australian Taxation Office’s Management and Use of Annual
Investment Income Reports.

79
3.70 Theȱ entitiesȱ thatȱ haveȱ anȱ obligationȱ toȱ supplyȱ theȱ taxȱ Officeȱ withȱ
legislatedȱdataȱrangeȱinȱsizeȱandȱtechnicalȱcapabilityȱfromȱhighȱvolume,ȱhighlyȱ
technicalȱ reportersȱ suchȱ asȱ majorȱ financialȱ institutionsȱ toȱ lowȱ volume,ȱ
technicallyȱ unsophisticatedȱ enterprises,ȱ suchȱ asȱ smallȱ familyȱ businesses.ȱ Theȱ
Taxȱ Officeȱ advisedȱ thatȱ itȱ isȱ notȱ practicalȱ orȱ appropriateȱ toȱ identifyȱ oneȱ
reportingȱ channelȱ forȱ allȱ reporters.ȱ Nevertheless,ȱ theȱ Taxȱ Officeȱ advisedȱ ofȱ aȱ
clearȱ emphasisȱ onȱ encouragingȱ reportersȱ toȱ moveȱ toȱ electronicȱ reporting.ȱ Forȱ
most,ȱ thisȱ meansȱ usingȱ oneȱ orȱ moreȱ ofȱ theȱ reportingȱ modulesȱ withinȱ theȱ Taxȱ
OfficeȇsȱElectronicȱCommerceȱInterfaceȱ(ECI)ȱapplication.ȱWithȱregardȱtoȱhighȱ
volumeȱ reporters,ȱ theȱ Taxȱ Officeȱ hasȱ initiatedȱ aȱ projectȱ toȱ reviewȱ theȱ Taxȱ
Officeȇsȱ bulkȱ takeȬonȱ proceduresȱ withȱ theȱ intentionȱ ofȱ developingȱ anȱ
automatedȱ capabilityȱ forȱ exchangingȱ dataȱ securely,ȱ onȱ aȱ frequencyȱ thatȱ
providesȱtheȱbestȱlevelȱofȱefficiencyȱforȱtheȱTaxȱOfficeȱandȱitsȱclients.ȱȱ
3.71 Reportingȱ channelsȱ forȱ legislatedȱ dataȱ areȱ detailedȱ withinȱ variousȱ
reportingȱ specificationsȱ issuedȱ byȱ theȱ Taxȱ Office.ȱ Theyȱ currentlyȱ includeȱ theȱ
following:ȱ
x paperȱbasedȱreporting;ȱ
x magneticȱmediaȱ(computerȱfloppyȱdiskȱorȱmagneticȱcartridgeȱtape).ȱTheȱ
TaxȱOfficeȱwithdrewȱtheȱoptionȱofȱreportingȱonȱmagneticȱcartridgeȱtapeȱ
fromȱ Juneȱ 2006ȱ asȱ aȱ resultȱ ofȱ theȱ industryȬwideȱ phasingȱ outȱ ofȱ thisȱ
medium;ȱ ANAOȱ understandsȱ thatȱ theȱ Taxȱ Officeȱ hasȱ extendedȱ itsȱ useȱ
onȱaȱȇcaseȱbyȱcaseȇȱbasisȱtoȱassistȱsomeȱlargerȱreportersȱinȱtheirȱtransitionȱ
toȱotherȱreportingȱchannels;ȱ
x opticalȱmediaȱ(CDȱorȱDVD);ȱandȱ
x electronicȱ transmission,ȱ specificallyȱ throughȱ theȱ Taxȱ Officeȇsȱ ECIȱ
application.ȱ
3.72 Inȱ2003ȱtheȱTaxȱOfficeȱadoptedȱaȱstrategicȱapproachȱtoȱtheȱselectionȱandȱ
useȱ ofȱ channelsȱ forȱ communicationȱ toȱ andȱ fromȱ theȱ Taxȱ Office’sȱ clients.ȱ Theȱ
Taxȱ Officeȱ revisedȱ theȱ strategyȱ inȱ 2005.ȱ Theȱ Taxȱ Officeȱ explainedȱ theȱ channelȱ
strategyȱinȱthisȱway: 66 ȱȱ
Theȱaimȱofȱtheȱchannelȱstrategyȱisȱtoȱcreateȱanȱeffectiveȱmethodȱforȱinvestingȱinȱ
theȱ development,ȱ enhancement,ȱ crossȱ enterpriseȱ management,ȱ andȱ useȱ ofȱ
customerȱcontactȱchannelsȱforȱtheȱdeliveryȱofȱTaxȱOfficeȱproductsȱandȱservice,ȱ
whilstȱminimisingȱtheȱburdenȱandȱcostȱofȱcompliance.ȱTheȱstrategyȱisȱaȱmeansȱ
66
Tax Office Channel Strategy and Framework at a Glance, 23 February 2005.

80
ofȱencouragingȱvoluntaryȱcomplianceȱ(byȱmakingȱcomplianceȱeasier)ȱthroughȱ
considerationȱ ofȱ theȱ wayȱ clientsȱ areȱ treated,ȱ clientȱ preferencesȱ andȱ inherentȱ
channelȱcharacteristics.ȱInȱthisȱwayȱitȱisȱconsistentȱwithȱtheȱTaxpayer’sȱCharterȱ
andȱ alignedȱ withȱ theȱ principlesȱ ofȱ brandȱ managementȱ andȱ theȱ complianceȱ
model.ȱ
3.73 Whilstȱtheȱfocusȱofȱtheȱstrategyȱhasȱ beenȱ onȱ communicationsȱ withȱ theȱ

Taxȱ Office’sȱ clientsȱ inȱ relationȱ toȱ taxȱ returnsȱ andȱ responsibilitiesȱ directlyȱ
relatedȱ toȱ these,ȱ theȱ ANAOȱ acceptedȱ thatȱ itȱ isȱ anȱ appropriateȱ frameworkȱ forȱ
guidanceȱ aboutȱ theȱ identificationȱ ofȱ theȱ bestȱ reportingȱ channelsȱ forȱ legislatedȱ
andȱrequisitionedȱdata.ȱTheȱreportingȱchannelsȱforȱlegislatedȱdataȱareȱdetailedȱ
withinȱ variousȱ reportingȱ specificationsȱ issuedȱ byȱ theȱ Taxȱ Officeȱ forȱ legislatedȱ
data.ȱFullȱimplementationȱofȱtheȱchannelȱstrategyȱmayȱrequireȱchangesȱtoȱthoseȱ
reportingȱspecifications.ȱȱ
3.74 Onceȱ theȱ ECMPȱ Changeȱ Programȱ isȱ operational,ȱ thereȱ willȱ beȱ greaterȱ
scope,ȱandȱgreaterȱneed,ȱforȱaȱwholeȬofȬTaxȱOfficeȱapproach. 67 ȱThisȱisȱbecauseȱ
theȱECMPȱChangeȱProgramȱwillȱhelpȱtheȱTaxȱOfficeȱobtainȱaȱwholeȬofȬtaxpayerȱ
viewȱ ofȱ theȱ risksȱ associatedȱ withȱ taxpayersȱ whetherȱ theyȱ beȱ individuals,ȱ
companies,ȱ trusts,ȱ partnerships,ȱ superannuationȱ entitiesȱ orȱ governmentȱ
agencies.ȱ Increasingly,ȱ complianceȱ managementȱ andȱ provisionȱ ofȱ betterȱ
servicesȱrequiresȱaȱwholeȬofȬTaxȱOfficeȱoutlook.ȱȱ
3.75 Requisitionedȱ dataȱ isȱ aȱ wholeȱ ofȱ Taxȱ Officeȱ resource.ȱ However,ȱ
corporateȱ prioritiesȱ andȱ businessȱ lineȱ prioritiesȱ couldȱ divergeȱ notȱ onlyȱ inȱ
relationȱ toȱ theȱ acquisitionȱ ofȱ aȱ particularȱ setȱ ofȱ data,ȱ butȱ alsoȱ inȱ relationȱ toȱ
mattersȱsuchȱasȱtheȱtiming,ȱquality,ȱpriorityȱofȱuseȱofȱtheȱdataȱandȱtheȱchannelȱ
byȱ whichȱ theȱ dataȱ isȱ providedȱ toȱ theȱ Taxȱ Office.ȱ Itȱ mayȱ beȱ preferableȱ forȱ theȱ
TaxȱOfficeȱtoȱadoptȱaȱmoreȱcorporateȱandȱstrategicȱapproachȱtoȱtheȱacquisitionȱ
ofȱ data,ȱ havingȱ regardȱ toȱ theȱ dataȱ beingȱ primarilyȱ aȱ corporateȱ ratherȱ thanȱ
businessȱlineȱresource.ȱȱ
3.76 Inȱ 2003ȱ theȱ Cashȱ Economyȱ Taskȱ Forceȱ madeȱ aȱ numberȱ ofȱ
recommendationsȱtoȱimproveȱtheȱTaxȱOffice’sȱ businessȬtoȬconsumerȱdealings.ȱ
AspectsȱofȱRecommendationȱ5.10ȱofȱtheȱReportȱofȱtheȱTaskȱForceȱareȱrelevantȱ
toȱdataȱacquisition,ȱasȱtheȱtaskȱforceȱrecommendedȱtheȱTaxȱOffice:ȱȱ
[I]dentifyȱ aȱ broaderȱ rangeȱ ofȱ thirdȱ partyȱ informationȱ sourcesȱ andȱ negotiateȱ
withȱtheirȱownersȱtoȱprovideȱappropriateȱinformationȱonȱaȱregularȱandȱtimelyȱ
67
See Chapter 1 Background and Context, for a description of the Easier, Cheaper and More Personalised
(ECMP) Change Program, and the Tax Offices introduction of a new ICP system.

81
basisȱandȱdevelopȱandȱimplementȱmoreȱsystematicȱandȱregularȱapproachesȱtoȱ
thirdȱpartyȱdataȱmatching. 68 ȱȱ
3.77 TheȱTaxȱOfficeȱagreedȱtoȱthisȱrecommendation.ȱTheȱTaxȱOfficeȱadvisedȱ
thatȱtheȱrecommendationȱhasȱbeenȱfullyȱ implemented.ȱTheȱANAOȱnotedȱthatȱ
theȱ initiativesȱ ofȱ theȱ DMSCȱ haveȱ assistedȱ withȱ theȱ implementationȱ ofȱ thisȱ
recommendation.ȱ Nevertheless,ȱ theȱ ANAOȱ observedȱ thatȱ theȱ Taxȱ Officeȱ doesȱ
notȱhaveȱaȱcorporate,ȱstrategicȱdataȱacquisitionȱplan.ȱ
Quality
3.78 TheȱqualityȱofȱinternalȱTaxȱOfficeȱdata,ȱtheȱTaxȱOfficeȱidentityȱmatchingȱ
engines,ȱ andȱ externalȱ dataȱ allȱ affectȱ theȱ effectivenessȱ ofȱ dataȱ matchingȱ
activities.ȱȱ
3.79 Havingȱ qualityȱ internalȱ dataȱ isȱ criticalȱ forȱ theȱ Taxȱ Officeȱ toȱ maximiseȱ
theȱ potentialȱ ofȱ itsȱ dataȱ matchingȱ activities.ȱ ANAOȱ Reportȱ No.47ȱ 2004–05ȱ
found:ȱȱ
[T]heȱ Taxȱ Officeȱ hasȱ cleansedȱ theȱ taxȱ databaseȱ substantially,ȱ removedȱ
extraneousȱ recordsȱ andȱ upgradedȱ dataȱ quality;ȱ tightenedȱ upȱ identityȱ
requirements;ȱbroughtȱTFNȱregistrationȱarrangementsȱupȱtoȱaȱhigherȱstandard;ȱ
andȱ isȱ undertakingȱ moreȱ effectiveȱ dataȱ matching,ȱ especiallyȱ withȱ theȱ useȱ ofȱ
moreȱextensiveȱthirdȱpartyȱdatasets. 69ȱ
3.80 TheȱANAOȱnotesȱthatȱsignificantȱworkȱisȱunderwayȱtoȱensureȱonlyȱhighȱ
integrityȱ (i.e.ȱ fitȱ forȱ purpose)ȱ dataȱ isȱ placedȱ onȱ theȱ newȱ ICPȱ system.ȱ Newȱ
arrangementsȱareȱbeingȱestablishedȱtoȱdealȱwithȱtheȱqualityȱofȱtheȱTaxȱOffice’sȱ
internalȱdataȱholdings,ȱtheȱqualityȱofȱlegislatedȱdataȱandȱincomingȱthirdȬpartyȱ
datasetsȱ inȱ theȱ newȱ ICPȱ environment.ȱ Theȱ newȱ arrangementsȱ areȱ beingȱ
implemented,ȱbutȱwillȱnotȱbeȱfullyȱeffectiveȱuntilȱtheȱICPȱbecomesȱoperational,ȱ
whichȱisȱlikelyȱtoȱbeȱduringȱ2008–09.ȱȱ
Pre-filling income tax returns

3.81 Theȱ ANAO’sȱ Performanceȱ Auditȱ Reportȱ No.37ȱ ofȱ 1998–99,ȱ Theȱ
ManagementȱofȱTaxȱFileȱNumbers,ȱbroughtȱtoȱtheȱTaxȱOffice’sȱattentionȱtheȱscopeȱ
forȱimprovedȱservicesȱtheȱTaxȱOfficeȱcouldȱprovideȱusingȱitsȱhighȱqualityȱTFNȱ
andȱ relatedȱ data.ȱ Theȱ ANAOȱ suggestedȱ theȱ Taxȱ Officeȱ wouldȱ beȱ able,ȱ inȱ
principle,ȱ toȱ provideȱ aȱ uniqueȱ serviceȱ toȱ manyȱ taxpayers,ȱ byȱ usingȱ theȱ
68
2003, Cash Economy Task Force, The cash economy under the New Tax System.
69
ANAO Report No.47 2004–05, Australian Taxation Office Tax File Number Integrity, p. 13.

82
informationȱ itȱ hadȱ availableȱ toȱ itȱ forȱ useȱ inȱ itsȱ dataȱ matchingȱ activities,ȱ toȱ
determineȱ theȱ incomeȱ taxȱ payableȱ forȱ certainȱ taxpayersȱ withoutȱ theȱ needȱ forȱ
thoseȱ taxpayersȱ toȱ completeȱ andȱ lodgeȱ anȱ incomeȱ taxȱ form.ȱ Theȱ Taxȱ Officeȱ
examinedȱthisȱsuggestion,ȱconcentratingȱinȱtheȱfirstȱinstanceȱonȱtwoȱcategoriesȱ
ofȱtaxpayers;ȱthoseȱinȱonlyȱreceiptȱofȱincomeȱfromȱCentrelinkȱandȱthoseȱinȱonlyȱ
receiptȱofȱwagesȱorȱsalaryȱincomeȱi.e.ȱapartȱfromȱanyȱincomeȱfromȱCentrelink.ȱ
AddressingȱtheȱissueȱofȱworkȬrelatedȱexpensesȱandȱotherȱdeductionsȱ(claimedȱ
byȱoverȱ80ȱperȱcentȱofȱemployeeȱtaxpayers)ȱwasȱanȱaddedȱcomplication.ȱȱ
3.82 Inȱ 1998ȱ theȱ Commonwealthȱ Governmentȱ announcedȱ theȱ Taxȱ Officeȱ
wouldȱ proceedȱ withȱ aȱ pilotȱ projectȱ toȱ preȬpopulateȱ theȱ taxȱ returnsȱ ofȱ someȱ
people.ȱTheȱGovernmentȱstatedȱthatȱthe:ȱȱ
TaxȱOfficeȱwillȱexploreȱtheȱoptionȱofȱreplacingȱtheȱexistingȱtaxpayerȱpreparedȱ
annualȱ returnȱ withȱ aȱ Taxȱ Officeȱ generatedȱ incomeȱ statement.ȱ Theȱ statementȱ
wouldȱ containȱ theȱ incomeȱ detailsȱ thatȱ haveȱ beenȱ reportedȱ throughȱ theȱ newȱ
withholdingȱ andȱ otherȱ systems.ȱ Taxpayersȱ couldȱ simplyȱ confirmȱ theȱ
informationȱ byȱ telephoneȱ toȱ receiveȱ theirȱ refund,ȱ orȱ addȱ detailsȱ ofȱ anyȱ otherȱ
incomeȱ andȱ claimsȱ forȱ rebatesȱ orȱ deductionsȱ asȱ appropriate.ȱ Conceptuallyȱ aȱ
statementȱ approachȱ wouldȱ applyȱ toȱ 3½ȱ millionȱ taxpayersȱ whoseȱ incomeȱ isȱ
derivedȱfromȱwagesȱandȱsalaries,ȱdividendsȱandȱinterestȱinvestmentsȱandȱwhoȱ
haveȱtheȱmoreȱstraightȬforwardȱrebatesȱandȱdeductions. 70 ȱȱ
3.83 TheȱGovernmentȱsaidȱtheȱTaxȱOfficeȱwouldȱpilotȱtheseȱnewȱstatementsȱ
forȱtheȱincomeȱyearȱ2000–01.ȱȱ
3.84 Theȱ Taxȱ Officeȱ definesȱ preȬfillingȱ asȱ provisionȱ ofȱ informationȱ thatȱ theȱ
Taxȱ Officeȱ currentlyȱ usesȱ forȱ dataȱ matchingȱ purposes,ȱ directlyȱ intoȱ anȱ
individualȱelectronicȱtaxȱpreparationȱorȱrecordȱkeepingȱtool. 71 ȱItȱisȱintendedȱtoȱ
makeȱtheȱprocessȱofȱpreparingȱandȱlodgingȱtaxȱ returnsȱeasierȱandȱquickerȱforȱ
individualȱtaxpayers.ȱForȱtaxpayers,ȱitȱalsoȱreducesȱtheȱlikelihoodȱofȱlaterȱTaxȱ
Officeȱ reviewȱ orȱ audit.ȱ Theȱ ANAOȱ notedȱ thatȱ preȬfillingȱ entailsȱ aȱ systemȱ ofȱ
dataȱ matching.ȱ Theȱ abilityȱ toȱ preȬfillȱ individuals’ȱ incomeȱ taxȱ returnȱ
informationȱ isȱ availableȱ toȱ individualsȱ throughȱ eȬtaxȱ andȱ taxȱ agentsȱ throughȱ
theȱTaxȱAgentȱPortal.ȱ
70
A New Tax System - The Howard Government’s Plan for a New Tax System, August 1998.
71
Tax Office, Pre-filling Intent Statement.

83
3.85 Theȱ Taxȱ Officeȱ beganȱ pilotingȱ theȱ preȬfillingȱ conceptȱ usingȱ eȬtax 72 ȱ forȱ
2004–05.ȱThisȱpilotȱwasȱlimitedȱtoȱpreȬfillingȱdataȱfromȱMedicareȱAustraliaȱandȱ
Centrelink.ȱ Inȱ 2005–06ȱ theȱ Taxȱ Officeȱ expandedȱ itsȱ preȬfillingȱ pilotȱ toȱ includeȱ
theȱ 30ȱ perȱ centȱ childcareȱ rebate,ȱ andȱ bankȱ interestȱ andȱ managedȱ fundȱ
informationȱfromȱselectedȱfinancialȱinstitutions. 73 ȱTheȱANAOȱnotedȱtheȱlimitedȱ
rangeȱ ofȱ fieldsȱ andȱ dataȱ availableȱ forȱ preȬfillingȱ inȱ 2005–06ȱ restrictedȱ theȱ
relevanceȱofȱtheȱpreȬfillingȱpilotȱfacilityȱtoȱaȱrelativelyȱsmallȱproportionȱofȱeȬtaxȱ
users.ȱ Inȱ 2006–07,ȱ approximatelyȱ 1.9ȱ millionȱ individualsȱ usedȱ eȬtaxȱ toȱ lodgeȱ
theirȱreturn,ȱandȱofȱthese,ȱapproximatelyȱ1.1ȱmillionȱusedȱpreȬfilling.ȱAȱfurtherȱ
1.9ȱ millionȱ preȬfilledȱ reportsȱ forȱ individualsȱ wereȱ downloadedȱ byȱ taxȱ agentsȱ
throughȱtheȱTaxȱAgentȱPortal. 74ȱ
3.86 Theȱ Taxȱ Officeȱ receivedȱ anȱ additionalȱ $20ȱ millionȱ fundingȱ inȱ theȱȱ
2007–08ȱ Federalȱ Budgetȱ toȱ significantlyȱ accelerateȱ theȱ preȬfillingȱ initiativeȱ forȱ
theȱ2007–08ȱincomeȱtaxȱreturnȱyear.ȱTheȱTaxȱOfficeȱadvisedȱthatȱinȱresponseȱtoȱ
theȱ Budgetȱ announcementȱ andȱ funding,ȱ preȬfillingȱ willȱ beȱ aȱ fullyȱ operationalȱ
facilityȱwithinȱtheȱICPȱenvironmentȱinȱ2008–09.ȱItȱwillȱbeȱinȱfullȱdeploymentȱforȱ
aroundȱnineȱmillionȱtaxpayers,ȱmanyȱofȱwhomȱwouldȱuseȱtheȱfacilityȱthroughȱ
theirȱtaxȱagents.ȱȱ
3.87 Theȱ Taxȱ Officeȱ anticipatesȱ thatȱ forȱ 2007–08,ȱ moreȱ peopleȱ willȱ useȱ theȱ
preȬfillingȱfacilityȱ(forȱ2006–07ȱincomeȱtaxȱyear)ȱbecause:ȱ
x preȬfillingȱserviceȱwillȱbeȱmoreȱvisibleȱinȱeȬtax;ȱ
x moreȱinformationȱwillȱbeȱavailableȱatȱanȱearlierȱdateȱmakingȱitȱaȱusefulȱ
serviceȱtoȱaȱwiderȱaudience;ȱandȱ
x theȱ2007–08ȱBudgetȱannouncementȱonȱpreȬfillingȱinitiativesȱandȱmediaȱ
interestȱraisedȱpublicȱawareness.ȱ
3.88 PreȬfillingȱ requiresȱ timely,ȱ highȱ qualityȱ dataȱ fromȱ employersȱ andȱ
financialȱinstitutions,ȱpreferablyȱonline.ȱȱ
72
The Tax Office has been developing e-tax since 1999 with the aim of making it easier and simpler for
taxpayers with less complex tax affairs to complete their tax return. E-tax is a free service the Tax Office
provides that allows taxpayers to lodge their individual tax returns online.
73
When e-tax 2005–06 was decommissioned, the proportion of the 1.6 million e-tax users who used pre-
filling information is as follow:
¾ 84,257 (5%) downloaded bank interest details;
¾ 65,909 (4%) downloaded information to claim the 30% Child Care Tax Rebate (CCTR);
¾ 104.009 (6%) downloaded out-of-pocket medical expenses from Medicare Australia; and
¾ 7,954 (<1%) downloaded managed fund information.
74
These figures are as at February 2008.

84
3.89 Theȱ ANAOȱ notedȱ theȱ preȬfillingȱ initiativeȱ requiresȱ theȱ Taxȱ Officeȱ toȱ
haveȱ relevantȱ thirdȱ partyȱ datasetsȱ availableȱ asȱ soonȱ asȱ possibleȱ atȱ theȱ endȱ ofȱ
theȱ financialȱ year.ȱ Inȱtheȱ Nordicȱ countries,ȱ whereȱ theȱ practiceȱ ofȱ preȬfillingȱ isȱ
wellȱestablishedȱandȱreportedlyȱoperatingȱwithȱaȱhighȱdegreeȱofȱsuccess,ȱthirdȱ
partiesȱ faceȱ strictȱ andȱ timelyȱ endȬofȬyearȱ reportingȱ obligationsȱ underȱ theȱ lawȱ
withȱ finalȱ informationȱ reportsȱ typicallyȱ requiredȱ withinȱ 3–4ȱ weeksȱ afterȱ theȱ
endȱofȱtheȱrelevantȱfiscalȱyear.ȱ
3.90 Theȱlegislationȱthatȱregulatesȱprovisionȱofȱthirdȱpartyȱdataȱnecessaryȱforȱ
theȱ preȬfillingȱ initiativeȱ (e.g.ȱ theȱ employmentȱ andȱ financialȱ data)ȱ requiresȱ theȱ
dataȱ beȱ providedȱ toȱ theȱ Taxȱ Officeȱ noȱ laterȱ thanȱ 14ȱ Augustȱ andȱ 31ȱ Octoberȱ
respectively. 75 ȱ However,ȱ aȱ numberȱ ofȱ dataȱ providersȱ haveȱ voluntarilyȱ
providedȱ theȱ dataȱ requiredȱ byȱ theȱ Taxȱ Officeȱ earlierȱ thanȱ theȱ legislatedȱ
requirements,ȱinȱorderȱtoȱenableȱpreȬfillingȱactivitiesȱtoȱoccur.ȱThisȱisȱbeneficialȱ
toȱaȱsignificantȱnumberȱofȱeȬtaxȱusersȱwhoȱlodgeȱtheirȱtaxȱreturnsȱearlyȱinȱorderȱ
toȱ obtainȱ aȱ taxȱ refund.ȱ Becauseȱ ofȱ this,ȱ theȱ longerȱ termȱ successȱ ofȱ preȬfillingȱ
underȱcurrentȱarrangementsȱwillȱdependȱonȱtheȱcontinuedȱvoluntaryȱeffortsȱofȱ
theȱsuppliersȱofȱlegislatedȱdata.ȱȱ
3.91 However,ȱ givenȱ theȱ Government’sȱ intentionȱ toȱ simplifyȱ incomeȱ taxȱ
returnsȱ byȱ providingȱ preȬfillingȱ servicesȱ forȱ aroundȱ 9ȱ millionȱ individualȱ
taxpayersȱwithȱeffectȱfromȱ2007–08ȱincomeȱyear,ȱtheȱANAOȱconsideredȱtheȱTaxȱ
Office’sȱ relianceȱ onȱ theȱ goodwillȱ ofȱ dataȱ providersȱ toȱ provideȱ dataȱ earlierȱ
mightȱ notȱ beȱ sufficientȱ toȱ optimiseȱ theȱ implementationȱ andȱ efficiencyȱ ofȱ preȬ
fillingȱinitiative.ȱ
3.92 TheȱTaxȱOfficeȱadvisedȱduringȱtheȱyearȱ2008,ȱitȱwillȱencourageȱreportersȱ
toȱ submitȱ theirȱ reportsȱ earlier.ȱ Forȱ theȱ longerȱ term,ȱ theȱ ANAOȱ suggestedȱ theȱ
Taxȱ Officeȱ considerȱ theȱ needȱ toȱ recommendȱ legislativeȱ changeȱ toȱ bringȱ theseȱ
datesȱforwardȱandȱmandateȱelectronicȱtransmissionȱinȱaȱrangeȱofȱareas.ȱȱ
3.93 TheȱinclusionȱofȱtheȱTFNȱasȱaȱkeyȱidentifierȱinȱlegislatedȱdataȱhasȱbeenȱaȱ
factorȱinȱtheȱhigherȱintegrityȱofȱthatȱdataȱandȱtheȱimprovedȱadministrationȱthatȱ
comesȱfromȱitsȱuse. 76 ȱAnȱissueȱforȱconsiderationȱisȱtheȱattachmentȱofȱtheȱTFNȱtoȱ
someȱthirdȱpartyȱdataȱinȱaȱsimilarȱmanner.ȱTheȱANAOȱnotedȱthatȱanyȱoptionsȱ
forȱ legislativeȱ amendmentȱ wouldȱ requireȱ discussionȱ withȱ theȱ Treasuryȱ inȱ theȱ
firstȱinstance.ȱ
75
This is because historically, this data was supplied to the Tax Office for post-issue data matching against
income details provided by taxpayers.
76
Audit Report No.47 2004–05, Australian Taxation Office Tax File Number Integrity (see also Audit Report
No.37 1998–99, Management of Tax File Numbers).

85
Recommendation No.3
3.94 Theȱ ANAOȱ recommendsȱ thatȱ toȱ simplifyȱ incomeȱ taxȱ returnsȱ byȱ
providingȱpreȬfillingȱforȱincreasedȱnumbersȱofȱtaxpayersȱtheȱTaxȱOfficeȱdiscussȱ
withȱtheȱTreasuryȱoptionsȱinȱrelationȱtoȱtheȱpreȬfillingȱinitiative,ȱnamely:ȱ
x bringingȱ theȱ datesȱ forwardȱ forȱ theȱ provisionȱ ofȱ requisiteȱ thirdȱ partyȱ
data;ȱȱ
x mandatingȱelectronicȱtransmissionȱinȱaȱrangeȱofȱareas;ȱandȱȱ
x includingȱ theȱ TFNȱ onȱ someȱ additionalȱ dataȱ sets,ȱ havingȱ regardȱ toȱ theȱ
needȱ toȱ balanceȱ privacyȱ concernsȱ andȱ improvingȱ theȱ efficiencyȱ andȱ
effectivenessȱofȱpublicȱadministration.ȱȱȱ
3.95 ATOȱ Response:ȱ Agreed.ȱ Theȱ Taxȱ Officeȱ isȱ committedȱ toȱ improveȱ
servicesȱtoȱtaxpayersȱthroughȱtheȱpreȬfillingȱinitiative,ȱandȱrecognisesȱtheȱneedȱ
toȱ bringȱ forwardȱ theȱ availabilityȱ ofȱ dataȱ toȱ supportȱ this.ȱ Forȱ 2007/2008ȱ theȱ
focusȱ hasȱ beenȱ onȱ encouragingȱ largeȱ providersȱ toȱ voluntarilyȱ lodgeȱ
informationȱearly,ȱandȱwhereverȱpossible,ȱ electronically.ȱ Earlyȱ indicationsȱ areȱ
thatȱtheseȱprovidersȱrecogniseȱtheȱbenefitsȱforȱtheirȱcustomersȱandȱemployeesȱ
andȱ willȱ coȬoperate.ȱ Theȱ Taxȱ Officeȱ willȱ discussȱ changesȱ toȱ enhanceȱ theȱ preȬ
fillingȱ processȱ withȱ Treasury.ȱ Whereȱ theȱ inclusionȱ ofȱ aȱ taxȱ fileȱ numberȱ onȱ
additionalȱ dataȱ setsȱ isȱ consideredȱ warrantedȱ toȱ supportȱ theȱ treatmentȱ ofȱ
complianceȱrisks,ȱtheȱmatterȱwillȱbeȱdiscussedȱwithȱTreasury.ȱȱ
Optimising the potential of data matching and analytics

Building on existing strengths
3.96 TheȱANAOȱfoundȱthatȱtheȱTaxȱOfficeȱmakesȱgoodȱuseȱofȱtheȱsubstantialȱ
dataȱreceivedȱfromȱthirdȱpartiesȱasȱaȱlegislativeȱrequirement. 77 ȱEachȱsetȱofȱdataȱ
isȱ usedȱ forȱ dataȱ matching.ȱ Nevertheless,ȱ theȱ ANAOȱ considersȱ thatȱ theȱ Taxȱ
Officeȱcouldȱmoreȱfullyȱuseȱthisȱdata;ȱthereȱareȱsomeȱsubsetsȱofȱitȱthatȱareȱnotȱ
used.ȱ Theȱ Taxȱ Office’sȱ dataȱ matchingȱ activityȱ isȱ largelyȱ limitedȱ toȱ individualȱ
taxpayers;ȱ thereȱ isȱ scopeȱ forȱ usingȱ legislatedȱ dataȱ inȱ dataȱ matchingȱ andȱ
analyticsȱ projectsȱ toȱ betterȱ manageȱ complianceȱ risksȱ aboutȱ nonȬindividualȱ
taxpayersȱ (companies,ȱ trusts,ȱ partnerships,ȱ superannuationȱ fundsȱ andȱ
governmentȱ agencies).ȱ Theȱ Taxȱ Officeȱ couldȱ alsoȱ makeȱ betterȱ useȱ ofȱ theȱ dataȱ
thirdȱ partiesȱ provideȱ underȱ legislativeȱ requirementsȱ inȱ respectȱ ofȱ certainȱ
classesȱ ofȱ investmentȱ incomeȱ receivedȱ byȱ individualȱ taxpayers,ȱ suchȱ asȱ
77
Appendix 1 contains a comprehensive list of the data available to the Tax Office.

86
dividendsȱ andȱ distributionsȱ fromȱ partnerships,ȱ trustsȱ (includingȱ unitȱ trusts)ȱ

andȱprivateȱcompanies.ȱThereȱmayȱbeȱanȱimpliedȱobligationȱonȱtheȱTaxȱOfficeȱ
toȱuseȱcompletelyȱallȱdataȱthatȱisȱprovidedȱtoȱitȱbyȱotherȱpartiesȱinȱfulfilmentȱofȱ
theȱlegislativeȱobligationȱonȱthem.ȱTheȱANAOȱunderstoodȱthatȱtheȱTaxȱOfficeȱ
wouldȱaddressȱanyȱimpliedȱobligationȱhavingȱregardȱtoȱaȱrangeȱofȱfactorsȱthatȱ
requireȱtheȱprioritisationȱofȱactivity,ȱincludingȱanȱassessmentȱofȱrisksȱrelevantȱ
toȱ theȱ dataȱ andȱ theȱ allocationȱ ofȱ resourcesȱ requiredȱ toȱ addressȱ theȱ risk.ȱ Theȱ
ANAOȱ notesȱ that,ȱ inȱ responseȱ toȱ Recommendationȱ No.7ȱ ofȱ Auditȱ Reportȱȱ
No.48ȱ2003–04,ȱTheȱAustralianȱTaxationȱOffice’sȱAdministrationȱandȱUseȱofȱAnnualȱ
InvestmentȱIncomeȱReports,ȱtheȱTaxȱOfficeȱintendsȱtoȱincludeȱtheȱcapacityȱtoȱdoȱ
thisȱ asȱ partȱ ofȱ Releaseȱ 3ȱ ofȱ theȱ ECMPȱ Changeȱ Programȱ scheduledȱ forȱ
deploymentȱ inȱ 2008.ȱ Thereȱ mayȱ alsoȱ beȱ scopeȱ toȱ makeȱ greaterȱ useȱ ofȱ PAYGȱ
PaymentȱSummaries.ȱȱ
3.97 Theȱ ANAOȱ consideredȱ thereȱ mayȱ alsoȱ beȱ scopeȱ forȱ additionalȱ dataȱ
matchingȱ andȱ analyticsȱ projectsȱ inȱ severalȱ otherȱ areas,ȱ suchȱ asȱ assessableȱ
governmentȱpayments 78 ,ȱdebt,ȱfringeȱbenefitsȱtax,ȱGSTȱandȱtheȱcashȱeconomy.ȱ
Mostȱ ofȱ theseȱ areasȱ wouldȱ benefitȱ fromȱ betterȱ useȱ ofȱ existingȱ data,ȱ notȱ
necessarilyȱacquisitionȱofȱmoreȱdata.ȱEachȱofȱtheseȱareasȱhasȱbeenȱexaminedȱinȱ
previousȱANAOȱaudits,ȱwhichȱalsoȱcanvassedȱtheȱopportunitiesȱforȱimprovedȱ
taxȱadministrationȱthatȱcouldȱariseȱfromȱtheȱbetterȱuseȱofȱexistingȱdata.ȱȱ
3.98 Theȱ Taxȱ Officeȱ hasȱ historicallyȱ usedȱ dataȱ matchingȱ andȱ analyticsȱ forȱ
complianceȱactivities.ȱItȱaimsȱtoȱidentifyȱnonȬcomplianceȱwithȱrespectȱto:ȱ
x registrationȱ–ȱbyȱidentifyingȱpeopleȱandȱentitiesȱoutsideȱtheȱtaxȱsystem;ȱ
x lodgementȱ–ȱbyȱdetectingȱlateȱlodgementȱorȱfailureȱtoȱlodge;ȱandȱ
x reportingȱ–ȱbyȱdetectingȱundisclosedȱorȱunderȬreportedȱincome.ȱ
78
Assessable government payments include Australian and state government payments in relation to
bounties; diesel fuel rebates; fuel tax credits; fuel grants; fuel sales grants; cleaner fuel grants; product
stewardship (oil) benefit; Department of Agriculture, Fisheries and Forestry grants; drought relief;
purchase of water tanks; school bus subsidies; heritage and conservation (including water conservation)
incentives; employee subsidies; export incentive grants; industry restructuring and adjustment payments;
industry research and development subsidies and grants; and Medicare payments for medical
practitioners. The Tax Office’s administration of assessable government payments has been the subject
of previous audits and remains an area of compliance risk, as reported in previous audits (Audit Report
No 3 of 1998–99, Assessable Government Industry Assistance; Follow-up Audit, tabled on 12 August
1998) most recently Audit Report No. 47, 2004–05, Australian Taxation Office Tax File Number Integrity,
especially Chapter 6 and recommendation No. 7). The Tax Office recently estimated that aggregate
annual government outlays on assessable government payments would be around $10 billion. There are
continuing problems, ranging from incomplete reporting requirements on tax returns, inadequate or
incorrect advice being given by federal and state authorities; poor controls over data quality by the Tax
Office and other relevant Commonwealth authorities, lack of compliance with GST reporting and
payment requirements; to inadequate data matching by the Tax Office. In the absence of any recent
detailed risk assessment, ANAO considered that assessable government payments are potentially an
area of serious compliance risk.

87
3.99 Itȱalsoȱaimsȱtoȱdetectȱinstancesȱofȱidentityȱfraud,ȱidentityȱtheftȱandȱtheȱ
misuseȱofȱidentityȱinformation.ȱ
3.100 Thereȱ mayȱ beȱ scopeȱ toȱ addȱ ‘meetingȱ establishedȱ obligations’ȱ toȱ thisȱ
complianceȱ agenda,ȱ specificallyȱ relatingȱ toȱ taxȱ debt.ȱ Accordingȱ toȱ theȱ Taxȱ
Office’sȱ Complianceȱ Program,ȱ makingȱ correctȱ andȱ timelyȱ paymentȱ isȱ partȱ ofȱ
theȱ taxpayers’ȱ obligation.ȱ Theȱ ANAOȱ notedȱ thatȱ theȱ Taxȱ Officeȱ hasȱ severalȱ
analyticsȱprojectsȱthatȱbuildȱmodelsȱforȱdebtȱcaseȱselectionȱandȱprioritisationȱofȱ
debtȱcollectionȱcases.ȱInȱaddition,ȱtheȱANAOȱnotedȱthatȱdataȱmatchingȱprojectsȱ
withinȱcomplianceȱbusinessȱlinesȱhaveȱanȱopportunityȱtoȱprovideȱsomeȱinputsȱ
forȱ theȱ Debtȱ businessȱ line.ȱ Theȱ ANAOȱ understoodȱ thatȱ duringȱ 2007ȱ theȱ Debtȱ
businessȱ lineȱ receivedȱ additionalȱ fundingȱ forȱ aȱ rangeȱ ofȱ dataȱ matchingȱ andȱ
analyticsȱprojects.ȱȱ
3.101 TheȱANAOȱalsoȱconsideredȱthereȱmayȱbeȱscopeȱforȱacquiringȱaȱnumberȱ
ofȱ additionalȱ externalȱ datasetsȱ (suchȱ asȱ elementsȱ ofȱ theȱ SENSISȱ databaseȱ forȱ
seriousȱnonȱcomplianceȱprojects). 79 ȱȱ
3.102 Mostȱ ofȱ theȱ ‘situational’ȱ orȱ ‘projectȱ based’ȱ dataȱ matchingȱ projectsȱ areȱ
quiteȱ unlikeȱ theȱ largeȬscaleȱ postȬissueȱ automatedȱ systemsȱ dataȱ matchingȱ
conductedȱ throughȱ theȱ ATOms.ȱ Thisȱ isȱ becauseȱ theȱ projectsȱ involveȱ aȱ muchȱ
largerȱ elementȱ ofȱ riskȱ exploration,ȱ analysisȱ andȱ identification.ȱ Thisȱ leadsȱ toȱ aȱ
decisionȱ onȱ complianceȱ activitiesȱ afterȱ theȱ dataȱ hasȱ beenȱ acquiredȱ andȱ
analysed.ȱ Evenȱ thoughȱ theseȱ projectsȱ containȱ aȱ significantȱ researchȱ andȱ
developmentȱ component,ȱ theyȱ invariablyȱ resultȱ inȱ Taxȱ Officeȱ administrativeȱ
actionȱinȱrelationȱtoȱtaxȱpayers.ȱȱ
3.103 Theȱ ANAOȱ consideredȱ thereȱ mayȱ beȱ scopeȱ forȱ increasedȱ exploratoryȱ
useȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ toȱ identifyȱ andȱ improveȱ theȱ Taxȱ Office’sȱ
understandingȱofȱaȱrangeȱ ofȱcomplianceȱ risks.ȱ Suchȱ risksȱincludeȱ thoseȱtoȱtheȱ
integrityȱofȱtheȱtaxȱsystem,ȱtheȱTaxȱOffice’sȱreputationȱandȱtoȱtheȱrevenueȱbase.ȱ
3.104 TheȱANAOȱnotedȱthatȱthereȱareȱsynergiesȱamongstȱthatȱvarietyȱofȱdataȱ
matchingȱ andȱ analyticsȱ methodologiesȱ thatȱ canȱ substantiallyȱ improveȱ theȱ
valueȱ ofȱ dataȱ toȱ theȱ Taxȱ Office.ȱ Specificȱ dataȱ matchingȱ methodologiesȱ canȱ
improveȱ theȱ qualityȱ ofȱ variousȱ analyticsȱ methodologies,ȱ forȱ exampleȱ byȱ
improvingȱ theȱ qualityȱ andȱ valueȱ ofȱ dataȱ inputs.ȱ Conversely,ȱ analyticsȱ
methodologiesȱ canȱ alsoȱ provideȱ technologyȱ toȱ assistȱ dataȱ matchingȱ activities,ȱ
byȱimproving,ȱforȱexample,ȱtheȱefficiencyȱandȱeffectivenessȱofȱtheȱselectionȱofȱ
79
By ‘SENSIS’ the ANAO means the most up-to-date electronic edition of the white and yellow paged
phone books.

88
‘atȱrisk’ȱcasesȱasȱaȱresultȱofȱdegreesȱofȱmismatch.ȱInȱaddition,ȱtheȱvalueȱofȱdataȱ
toȱtheȱTaxȱOfficeȱcanȱbeȱimprovedȱbyȱmatchingȱandȱanalysingȱitȱinȱrelationȱtoȱaȱ
varietyȱ ofȱ methodologiesȱ andȱ additionalȱ dataȱ basesȱ andȱ usingȱ itȱ inȱ aȱ
multiplicityȱofȱways.ȱȱ
3.105 TheȱTaxȱOfficeȱobtainsȱgreatestȱbenefitȱfromȱthirdȱpartyȱdataȱwhenȱtheȱ
dataȱmatchingȱandȱanalyticsȱcapabilityȱcanȱbeȱappliedȱtoȱitȱfully,ȱandȱtheȱdataȱ
setȱ canȱ beȱ usedȱ withȱ aȱ rangeȱ ofȱ otherȱ datasetsȱ toȱ improveȱ complianceȱ and/orȱ
provideȱbetterȱservices.ȱȱ
3.106 TheȱANAOȱconsideredȱthatȱthereȱwouldȱbeȱmeritȱinȱtheȱanalyticsȱgroupȱ
consultingȱ moreȱ closelyȱ withȱ theȱ DMSCȱ whenȱ itȱ nextȱ undertakesȱ strategicȱ
planning,ȱ outreachȱ andȱ prioritisationȱ ofȱ projects.ȱ Thisȱ wouldȱ provideȱ anȱ
opportunityȱ forȱ theȱ closerȱ integrationȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ
capabilityȱwithȱwholeȬofȬTaxȱOfficeȱandȱwholeȬofȬclientȱoperations.ȱȱ
Improving taxpayer experiences

Making compliance easier
3.107 Theȱ ANAOȱ consideredȱ thatȱ thereȱ isȱ scopeȱ forȱ theȱ Taxȱ Officeȱ toȱ betterȱ
manageȱ corporatelyȱ andȱ strategicallyȱ theȱ dataȱ matchingȱ andȱ analyticsȱ
capability.ȱ Amongstȱ otherȱ things,ȱ thisȱ couldȱ enableȱ aȱ closerȱ alignmentȱ ofȱ
complianceȱ responsesȱ toȱ theȱ complianceȱ model.ȱ Asȱ theȱ complianceȱ modelȱ
shows,ȱ theȱ appropriateȱ Taxȱ Officeȱ responseȱ forȱ theȱ majorityȱ ofȱ taxȱ payerȱ
complianceȱ issuesȱ isȱ anȱ educative,ȱ enablingȱ response,ȱ notȱ aȱ punitiveȱ one.ȱ
However,ȱ forȱ itȱ toȱ beȱ fullyȱ effective,ȱ thisȱ responseȱ hasȱ toȱ directlyȱ addressȱ theȱ
problemȱ thatȱ gaveȱ riseȱ toȱ theȱ complianceȱ concern.ȱ Inȱ addition,ȱ theȱ responseȱ
wouldȱ beȱ moreȱ effectiveȱ ifȱ itȱ madeȱ complianceȱ easierȱ andȱ cheaperȱ forȱ theȱ taxȱ
payer,ȱasȱtheȱECMPȱChangeȱProgramȱacknowledges.ȱȱ
3.108 Theseȱtwoȱfactorsȱ(addressingȱtheȱspecificȱtaxȱpayerȱcomplianceȱmatterȱ
andȱ makingȱ complianceȱ easierȱ andȱ cheaperȱ forȱ theȱ taxȱ payer)ȱ ultimatelyȱ
requireȱ aȱ responseȱ tailoredȱ toȱ theȱ situationȱ ofȱ theȱ specificȱ taxȱ payer.ȱ Theȱ
provisionȱ ofȱ webȬbasedȱ electronicȱ servicesȱ andȱ taxȱ payerȱ specificȱ
communicationsȱthatȱtheȱemergentȱdataȱmatchingȱandȱanalyticsȱcapabilityȱmayȱ
enableȱtheȱTaxȱOfficeȱtoȱfunctionȱinȱthisȱway.ȱȱ
3.109 Theȱ sameȱ capabilityȱ canȱ beȱ deployedȱ toȱ improveȱ theȱ efficiencyȱ andȱ
effectivenessȱwithȱwhichȱtheȱTaxȱOfficeȱmanagesȱcomplianceȱrisksȱatȱtheȱapexȱ
ofȱ theȱ complianceȱ pyramid.ȱ Inȱ thisȱ caseȱ theȱ emergentȱ dataȱ matchingȱ andȱ
analyticsȱ capabilityȱ couldȱ enableȱ theȱ Taxȱ Officeȱ toȱ detectȱ seriousȱ complianceȱ

89
risksȱ atȱ theȱ earliestȱ possibleȱ stageȱ andȱ instituteȱ effectiveȱ mitigationȱ strategiesȱ
tailoredȱtoȱspecificȱbehaviour.ȱȱ
3.110 Anȱ exampleȱ ofȱ howȱ theȱ Taxȱ Officeȱ hasȱ usedȱ theȱ dataȱ matchingȱ andȱ
analyticsȱ capabilityȱ toȱ makeȱ complianceȱ easierȱ canȱ beȱ seenȱ inȱ theȱ CGTȱ
CompliancesȱChallengesȱproject.ȱHere,ȱtheȱTaxȱOfficeȱusesȱstateȱrevenueȱofficeȱ
propertyȱsalesȱdataȱtoȱidentifyȱsalesȱofȱpropertiesȱforȱwhichȱrentalȱincomeȱhasȱ
previouslyȱ beenȱ declared;ȱ theȱ Taxȱ Officeȱ alertsȱ propertyȱ sellersȱ thatȱ haveȱ notȱ
yetȱ lodgedȱ anȱ incomeȱ taxȱ return,ȱ thatȱ theyȱ mayȱ needȱ toȱ considerȱ theȱ capitalȱ
gainsȱtaxȱimplicationsȱofȱtheȱsale.ȱ
3.111 PreȬfillingȱhasȱtheȱpotentialȱtoȱimproveȱtaxpayerȱexperiencesȱbyȱmakingȱ
complianceȱ easierȱ andȱ cheaper,ȱ asȱ relevantȱ fieldsȱ ofȱ theȱ taxȱ returnȱ wouldȱ beȱ
alreadyȱfilledȱin.ȱ
Provision of services in relation to economic transfers
3.112 Givenȱ theȱ Taxȱ Office’sȱ increasingȱ roleȱ inȱ deliveringȱ socialȱ policyȱ
throughȱadministeringȱeconomicȱtransfers,ȱsuchȱasȱgrants,ȱbenefits,ȱtaxȱoffsetsȱ
andȱredistributionȱprograms,ȱthereȱmayȱbeȱsignificantȱscopeȱforȱtheȱTaxȱOfficeȱ
toȱ provideȱ servicesȱ toȱ itsȱ clients. 80 ȱ Theȱ provisionȱ ofȱ improvedȱ servicesȱ inȱ
relationȱtoȱeconomicȱservicesȱisȱbutȱoneȱfeatureȱofȱimprovedȱtaxȱadministrationȱ
thatȱcouldȱbeȱenabledȱbyȱtheȱemergentȱdataȱmatchingȱandȱanalyticsȱcapability.ȱȱ
3.113 Inȱ addition,ȱ givenȱ thatȱ theȱ provisionȱ ofȱ aȱ serviceȱ canȱ beȱ theȱ mostȱ
appropriateȱTaxȱOfficeȱresponseȱtoȱtypicalȱcomplianceȱrisks,ȱtheȱdataȱmatchingȱ
andȱanalyticsȱcapabilityȱcanȱenableȱtheȱprovisionȱofȱthisȱservice.ȱThisȱmayȱbeȱaȱ
moreȱ efficientȱ andȱ effectiveȱ useȱ ofȱ theȱ capabilityȱ thanȱ usingȱ itȱ merelyȱ toȱ
addressȱincompleteȱorȱinaccurateȱreportingȱbyȱtaxȱpayersȱofȱtheirȱtaxȱliabilities.ȱȱ
3.114 Oneȱ exampleȱ ofȱ theȱ Taxȱ Officeȱ providingȱ aȱ serviceȱ throughȱ theȱ dataȱ
matchingȱ andȱ analyticsȱ capabilityȱ isȱ theȱ managementȱ ofȱ superannuationȱ
coȬcontributions.ȱ Inȱ thisȱ instance,ȱ theȱ Taxȱ Officeȱ usesȱ incomeȱ taxȱ returnȱ data,ȱ
andȱ superannuationȱ contributionȱ informationȱ providedȱ byȱ superannuationȱ
fundsȱtoȱcalculateȱeligibilityȱforȱtheȱcoȬcontributionȱpaymentȱandȱautomaticallyȱ
makeȱtheȱpayment.ȱȱ
80
The most significant economic transfers are the various fuel grant schemes that provide assistance to
users of various types of fuels, mainly for business purposes. They include the energy grants credits
scheme, the fuel sales grants scheme, the product stewardship for oil program and the cleaner fuels
grants scheme. Other transfers that provide assistance for families and individual taxpayers include the
family tax benefit, the baby bonus and the private health insurance benefit. Superannuation co-
contribution payments and superannuation guarantee payments provide the mechanism through which
certain superannuation transfers are effected, while the research and development tax offset and the
large scale film production expense tax offset provide selected assistance to industry.

90
3.115 TheȱANAOȱconsideredȱthatȱthereȱisȱscopeȱforȱtheȱTaxȱOfficeȱtoȱidentifyȱ
proactivelyȱ andȱ manageȱ strategically,ȱ opportunitiesȱ forȱ makingȱ complianceȱ
easierȱandȱimprovingȱserviceȱprovisionȱthroughȱtheȱbetterȱmanagementȱofȱtheȱ
dataȱmatchingȱandȱ analyticsȱcapability.ȱ Althoughȱ theȱ primeȱ responsibilityȱ forȱ
initiatingȱworkȱaboutȱtheȱprovisionȱofȱnewȱservicesȱinȱthisȱwayȱrestsȱwithȱriskȱ
owners,ȱ thereȱ isȱ scopeȱ forȱ theȱ DMSCȱ toȱ contributeȱ viaȱ itsȱ facilitationȱ andȱ
coordinationȱrole.ȱ
A paradigm shift
3.116 Introductionȱ ofȱ preȬfillingȱ representsȱ aȱ paradigmȱ shiftȱ forȱ theȱ Taxȱ
Office’sȱuseȱofȱdataȱmatchingȱandȱanalyticsȱinȱtaxȱadministration,ȱasȱitȱinvolvesȱ
aȱ shiftȱ fromȱ bulkȱ postȬassessmentȱ incomeȱ dataȱ matchingȱ toȱ preȬfillingȱ ofȱ
electronicȱreturns. 81 ȱInȱtheȱlongerȱterm,ȱasȱtheȱpreȬfillingȱinitiativeȱmaturesȱandȱ
moreȱ taxpayersȱ useȱ theȱ service,ȱ thereȱ mayȱ beȱ aȱ reducedȱ needȱ forȱ theȱ Taxȱ
Office’sȱpostȬassessmentȱautomatedȱdataȱmatchingȱprogram.ȱȱ
3.117 Provisionȱ ofȱ servicesȱ (enabledȱ byȱ dataȱ matchingȱ andȱ analytics)ȱ isȱ
anotherȱfeatureȱofȱthisȱshiftȱinȱtaxȱadministration.ȱWhileȱthereȱisȱaȱchallengingȱ
rangeȱofȱnewȱopportunitiesȱforȱtheȱTaxȱOfficeȱtoȱaddressȱasȱtheȱunderstandingȱ
ofȱthisȱserviceȱparadigmȱimproves,ȱtheȱlegislationȱunderȱwhichȱrelevantȱdataȱisȱ
acquiredȱ isȱ firmlyȱ groundedȱ inȱ theȱ complianceȬcentredȱ paradigmȱ ofȱ taxȱ
administration.ȱ
3.118 Theȱ ANAOȱ consideredȱ thatȱ theȱ DMSCȱ hasȱ successfullyȱ facilitatedȱ theȱ
moreȱcorporateȱandȱstrategicȱuseȱofȱdataȱmatchingȱasȱanȱintegralȱcomponentȱofȱ
taxȱ administration.ȱ Thisȱ hasȱ resultedȱ inȱ improvedȱ compliance,ȱ improvedȱ
servicesȱ andȱ theȱ moreȱ efficientȱ andȱ effectiveȱ useȱ ofȱ resources.ȱ Itȱ hasȱ alsoȱ
enabledȱ theȱ Taxȱ Officeȱ toȱ betterȱ understandȱ risks.ȱ Theȱ proceduralȱ
arrangementsȱ establishedȱ byȱ theȱ DMSCȱ haveȱ enabledȱ theȱ Taxȱ Officeȱ toȱ
improveȱtheȱuseȱofȱdataȱmatchingȱandȱcomplianceȱwithȱPrivacyȱCommissionerȱ
Guidelines.ȱ Whilstȱ theȱ ANAOȱ hasȱ notȱ examinedȱ dataȱ matchingȱ inȱ otherȱ
nationalȱ revenueȱ authorities,ȱ theȱ ANAOȱ acknowledgesȱ thatȱ theȱ Taxȱ Officeȱ isȱ
highlyȱ regardedȱ byȱ theȱ leadingȱ nationalȱ revenueȱ authoritiesȱ ofȱ theȱ OECDȱ asȱ
beingȱaȱleaderȱinȱthisȱfield.ȱ
3.119 Theȱ ANAOȱ consideredȱ thatȱ theȱ Analyticsȱ teamȱ inȱ theȱ OCKOȱ hasȱ
establishedȱ itsȱ valueȱ toȱ taxȱ administrationȱ duringȱ theȱ threeȱ yearsȱ sinceȱ itsȱ
establishment.ȱ Itȱ hasȱ pioneeredȱ manyȱ newȱ sophisticatedȱ mathematicalȱ andȱ
81
Commissioner's online update, May 2005.

91
statisticalȱmethodologiesȱresultingȱinȱimprovedȱcompliance,ȱimprovedȱservicesȱ
andȱtheȱmoreȱefficientȱandȱeffectiveȱuseȱofȱresources.ȱȱ
3.120 TheȱANAOȱsuggestedȱthatȱitȱmayȱnowȱbeȱopportuneȱtoȱbuildȱonȱtheseȱ
achievementsȱ givenȱ theȱ implementationȱ ofȱ theȱ ECMPȱ Changeȱ Programȱ duringȱ
theȱnextȱfewȱyears.ȱTheȱANAOȱconsidersȱthatȱtheȱrecognitionȱbyȱtheȱTaxȱOfficeȱ
ofȱ theȱ emergentȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ andȱ theȱ improvedȱ
managementȱofȱit,ȱbothȱcorporatelyȱandȱstrategically,ȱwouldȱbeȱaȱusefulȱstepȱtoȱ
takeȱinȱthisȱdirection.ȱTheȱANAOȱacknowledgedȱthatȱnecessarilyȱthisȱcapabilityȱ
willȱbeȱdistributedȱthroughoutȱtheȱTaxȱOfficeȱasȱitȱisȱdeployedȱonȱaȱdailyȱbasisȱ
toȱ supportȱ theȱ primaryȱ tasksȱ ofȱ improvedȱ compliance,ȱ provisionȱ forȱ servicesȱ
andȱ theȱ collectionȱ ofȱ revenue.ȱ Theȱ deploymentȱ ofȱ theȱ capabilityȱ inȱ thisȱ wayȱ
mayȱ heightenȱ theȱ needȱ forȱ strongerȱ corporateȱ andȱ strategicȱ guidance.ȱ Inȱ
addition,ȱ theȱ ANAOȱ consideredȱ thatȱ theȱ Taxȱ Officeȱ needsȱ toȱ developȱ aȱ
strategicȱ planȱ forȱ acquiringȱ andȱ usingȱ externalȱ dataȱ overȱ aȱ threeȱ toȱ fiveȱ yearȱ
period,ȱandȱthatȱthisȱplanȱhaveȱregardȱto:ȱ
x complianceȱrisks;ȱ
x aȱwholeȬofȬTaxȱOfficeȱperspective;ȱ
x includingȱasȱgoalsȱforȱtheȱuseȱofȱexternalȱdataȱcomplianceȱverification,ȱ
improvingȱ serviceȱ provisionȱ andȱ makingȱ complianceȱ easierȱ andȱ
cheaper;ȱ
x formingȱpartȱofȱaȱrollingȱdataȱacquisitionȱandȱuseȱprogram;ȱ
x identifyingȱandȱprioritisingȱadditionalȱexternalȱdatasetsȱforȱacquisitionȱ
(e.g.ȱ SENSISȱ data)ȱ asȱ wellȱ asȱ additionalȱ dataȱ matchingȱ andȱ analyticsȱ
projectsȱ acrossȱ theȱ wholeȱ Taxȱ Officeȱ (e.g.ȱ trustsȱ andȱ partnerships;ȱ
superannuation;ȱassessableȱgovernmentȱpayments;ȱdebt;ȱfringeȱbenefitsȱ
tax;ȱGSTȱandȱtheȱcashȱeconomy);ȱȱ
x includingȱ preferencesȱ forȱ channelsȱ andȱ methodsȱ ofȱ dataȱ acquisition;ȱ
andȱ
x guidingȱfutureȱdecisionȱmakingȱwithȱrespectȱto:ȱ
investmentȱ inȱ enhancingȱ theȱ qualityȱ ofȱ externalȱ dataȱ sources;ȱ
andȱ
paymentȱforȱexternalȱdata.ȱȱ

92
Recommendation No.4
3.121 Theȱ ANAOȱ recommendsȱ thatȱ theȱ Taxȱ Officeȱ developȱ aȱ threeȱ toȱ fiveȱ
yearȱcorporateȱandȱstrategicȱplanȱforȱtheȱacquisitionȱandȱuseȱofȱexternalȱdata.ȱȱ
3.122 ATOȱResponse:ȱAgreedȱȱ

93
4. Governance and Coordination
Arrangements
Thisȱ chapterȱ reviewsȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ governanceȱ arrangements,ȱ
includingȱ coordinationȱ ofȱ activities,ȱ performanceȱ monitoringȱ andȱ reporting,ȱ andȱ
guidanceȱforȱstaff.ȱ
Introduction
4.1 Theȱ ANAO’sȱ examinationȱ ofȱ theȱ Taxȱ Office’sȱ governanceȱ andȱ
coordinationȱfocusedȱon:ȱ
x managementȱofȱtheȱdataȱmatchingȱandȱanalyticsȱcapability;ȱ
x performanceȱmonitoringȱandȱreporting;ȱandȱ
x guidanceȱforȱTaxȱOfficeȱstaff.ȱ
Management of the data matching and analytics

capability
4.2 Theȱ administrationȱ ofȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ andȱ analyticsȱ
capabilityȱ isȱ distributedȱ amongstȱ theȱ businessȱ lines.ȱ Identityȱ matchingȱ andȱ
ATOmsȱ areȱ administeredȱ byȱ theȱ ME&Iȱ businessȱ line;ȱ theȱ dataȱ matchingȱ
projectsȱcoordinatedȱandȱfacilitatedȱbyȱtheȱDMSCȱareȱtheȱresponsibilityȱofȱtheȱ
businessȱ lineȱ thatȱ initiatedȱ them;ȱ andȱ analyticsȱ isȱ theȱ responsibilityȱ ofȱ theȱ
OCKO.ȱ Theȱ Businessȱ Solutionsȱ businessȱ lineȱ isȱ responsibleȱ forȱ theȱ preȬfillingȱ
project,ȱandȱhasȱalsoȱundertakenȱanȱevaluationȱofȱtheȱidentityȱmatchingȱfacility,ȱ
withȱ aȱ viewȱ toȱ designingȱ aȱ newȱ oneȱ thatȱ willȱ initiallyȱ beȱ usedȱ byȱ theȱ
Superannuationȱbusinessȱline,ȱandȱmayȱhaveȱwiderȱapplicationȱthroughoutȱtheȱ
TaxȱOffice.ȱȱ
4.3 Theȱ administrationȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ isȱ
necessarilyȱ distributedȱ asȱ theȱ capabilityȱ isȱ integralȱ toȱ taxȱ administration.ȱ Theȱ
Taxȱ Officeȱ hasȱ establishedȱ theȱ DMSCȱ toȱ coordinateȱ andȱ facilitateȱ theȱ bestȱ
corporateȱresultsȱfromȱtheȱcapability,ȱandȱotherȱcoordinationȱandȱconsultativeȱ
arrangements,ȱtoȱencourageȱbestȱpracticeȱandȱintraȬbusinessȱlineȱconsultation. 82 ȱ
82
Examples of the coordination arrangements initiated by the DMSC include the provision of guidance for
staff, in the form of a data matching policy External Data Matching Practice Statement CM 2004/17,
templates to use when preparing a Data Matching Concept Brief and a Data Matching Program Protocol,
and guidelines and FAQ’s on the Tax Office intranet. The DMSC has also established a Data Matching
Gatekeeper, a data matching register, and an annual certificate of assurance process that aims to
ensure compliance with the Privacy Commissioner’s Data Matching Guidelines.

94
Governance and Coordination Arrangements
Theȱ ANAOȱ consideredȱ theseȱ arrangementsȱ haveȱ generallyȱ workedȱ wellȱ andȱ
theȱ DMSCȱ hasȱ beenȱ pivotalȱ inȱ theȱ goodȱ resultsȱ theȱ Taxȱ Officeȱ hasȱ achievedȱ
fromȱtheȱdeploymentȱofȱtheȱcapability.ȱ
4.4 TheȱANAOȱconsideredȱthatȱtheȱCKO’sȱanalyticsȱgroupȱhasȱestablishedȱ
itsȱ valueȱ toȱ taxȱ administrationȱ butȱ couldȱ proceedȱ moreȱ strategicallyȱ inȱ theȱ
future.ȱForȱexample,ȱitȱwouldȱbeȱappropriateȱforȱtheȱCKOȱtoȱtakeȱtheȱinitiativeȱ
withȱ businessȱ linesȱ toȱ promoteȱ furtherȱ useȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ
capabilityȱinȱtaxȱadministration.ȱToȱdoȱthis,ȱitȱwouldȱbeȱnecessaryȱforȱtheȱgroupȱ
toȱ developȱ aȱ strategicȱ planȱ andȱ adoptȱ aȱ greaterȱ outreachȱ approachȱ aboutȱ
deployingȱ itsȱ capability.ȱ Theȱ ANAOȱ consideredȱ thisȱ approachȱ requiresȱ
increasedȱcoordinationȱwithȱtheȱDMSCȱtoȱensureȱtheȱtwoȱareasȱproceedȱjointlyȱ
andȱefficientlyȱwithȱrespectȱtoȱstrategicȱplanning,ȱoutreachȱandȱprioritisationȱofȱ
projects.ȱ
4.5 Theȱ ANAOȱ observedȱ thatȱ theȱ DMSCȱ andȱ theȱ CKO’sȱ committeesȱ (e.g.ȱ
theȱ Informationȱ Managementȱ Advisoryȱ Committee,ȱ theȱ Intelligenceȱ andȱ Riskȱ
Leadershipȱ Groupȱ andȱ theȱ Dataȱ Stewardsȱ Referenceȱ Group)ȱ chartersȱ wereȱ
updatedȱinȱMarchȱ2007ȱtoȱalignȱwithȱtheȱTaxȱOffice’sȱCommitteeȱManagementȱ
practiceȱstatement.ȱHoweverȱdespiteȱtheȱcloseȱinterrelationshipsȱofȱtheirȱgoalsȱ
andȱactivities, 83 ȱtheyȱwereȱdevelopedȱinȱisolationȱfromȱoneȱanother,ȱandȱdoȱnotȱ
referenceȱeachȱotherȱinȱtheirȱ‘governanceȱandȱrelationships’ȱsections.ȱ
4.6 Theȱ ANAOȱ notedȱ thatȱ theȱ Taxȱ Officeȱ recognisedȱ theȱ importanceȱ ofȱ
applyingȱ Taxȱ OfficeȬwideȱ agreedȱ termsȱ andȱ definitionsȱ andȱ isȱ currentlyȱ
developingȱaȱcommonȱbusinessȱlanguageȱrepositoryȱofȱkeyȱbusinessȱconcepts.ȱ
Duringȱ theȱ auditȱ theȱ Taxȱ Officeȱ tookȱ stepsȱ toȱ ensureȱ thatȱ thereȱ wouldȱ beȱ aȱ
consistentȱ understandingȱ andȱ interpretationȱ ofȱ keyȱ conceptsȱ suchȱ asȱ ‘dataȱ
matching’,ȱ‘identityȱmatching’,ȱ‘analytics’,ȱ‘dataȱmining’,ȱ‘dataȱmodelling’,ȱandȱ
‘dataȱ mapping’ȱ acrossȱ theȱ Taxȱ Office.ȱ Theȱ ANAOȱ notedȱ thatȱ whileȱ theȱ
abovementionedȱ termsȱ haveȱ beenȱ defined,ȱ theȱ processȱ ofȱ gainingȱ consistentȱ
usageȱacrossȱtheȱorganisationȱmayȱneedȱfurtherȱdevelopment.ȱ
83
For example, the DMSC states that its role is to ‘promote a corporate approach to identifying data that
meets business needs, acquisition of that data … and the use of that data within the organisation’ while
the Data Stewards Reference Group states that its propose is ‘improving and maintaining the quality of
data’, and the Information Management Advisory Committee’s scope includes all relevant principles,
policy, strategy, assurance arrangements and capabilities for the full range of activities and programs
designed to improve the management of information as a core Tax Office resource.

95
Recommendation No.5
4.7 Toȱ minimiseȱ duplicationȱ andȱ closeȱ gapsȱ inȱ responsibilitiesȱ andȱ
streamlineȱcoȬordinationȱarrangements,ȱtheȱANAOȱrecommendsȱtheȱTaxȱOfficeȱ
clarifyȱtheȱrolesȱofȱtheȱvariousȱcommitteesȱrelevantȱtoȱtheȱmanagementȱofȱtheȱ
dataȱmatchingȱandȱanalyticsȱcapability,ȱsoȱtheirȱindividualȱresponsibilitiesȱareȱ
integratedȱmoreȱclosely.ȱȱ
4.8 ATOȱResponse:ȱAgreedȱȱ
Performance monitoring and reporting

4.9 Performanceȱ monitoringȱ andȱ reportingȱ areȱ importantȱ aspectsȱ ofȱ
governance.ȱTimelyȱcollectionȱandȱanalysisȱofȱperformanceȱinformationȱaboutȱ
theȱ valueȱ thatȱ dataȱ matchingȱ andȱ analyticsȱ canȱ addȱ toȱ taxȱ administrationȱ isȱ
important.ȱItȱcanȱassistȱtheȱTaxȱOfficeȱmakeȱinformedȱdecisionsȱaboutȱinvestingȱ
inȱ theȱ developmentȱ ofȱ theȱ capabilityȱ andȱ theȱ extentȱ toȱ whichȱ itȱ isȱ usedȱ toȱ
achieveȱTaxȱOfficeȱoutcomes.ȱInȱsomeȱinstancesȱtheȱroleȱofȱdataȱmatchingȱandȱ
analyticsȱ mayȱ beȱ soȱ intermingledȱ withȱ otherȱ actions,ȱ thatȱ identifyingȱ theȱ
valuedȱaddedȱattributableȱtoȱitȱmayȱproveȱdifficult.ȱInȱotherȱcases,ȱseveralȱyearsȱ
mayȱ elapseȱ beforeȱ theȱ intendedȱ changesȱ areȱ achieved.ȱ Inȱ spiteȱ ofȱ theȱ
difficulties,ȱmanagersȱhaveȱavailableȱaȱrangeȱofȱevaluationȱmethodologiesȱthatȱ
haveȱbeenȱdesignedȱtoȱaddressȱtheseȱandȱotherȱchallengesȱofȱmeasurementȱandȱ
attribution.ȱ Theȱ methodologiesȱ coverȱ theȱ fullȱ rangeȱ ofȱ evaluationȱ fromȱ
qualitativeȱtoȱquantitative.ȱȱ
4.10 Majorȱ Taxȱ Officeȱ initiativesȱ inȱ whichȱ dataȱ matchingȱ andȱ analyticsȱ hasȱ
beenȱinstrumentalȱinȱachievingȱimprovedȱcomplianceȱjointlyȱwithȱotherȱactionsȱ
mayȱ takeȱ placeȱ overȱ severalȱ yearsȱ beforeȱ significantȱ improvementsȱ canȱ beȱ
noted.ȱ Identificationȱ ofȱ theȱ preciseȱ quantumȱ contributionȱ madeȱ byȱ dataȱ
matchingȱ andȱ analyticsȱ mayȱ notȱ beȱ possible,ȱ butȱ usuallyȱ aȱ qualitativeȱ
evaluationȱwillȱbeȱachievable.ȱȱ
Case study: data matching and improved compliance in the legal

profession
4.11 Dataȱmatchingȱandȱanalyticsȱareȱappliedȱjointlyȱwithȱotherȱcomponentsȱ
ofȱ taxȱ administration.ȱ Theseȱ includeȱ litigation,ȱ communication,ȱ marketing,ȱ
educationȱ andȱ outreachȱ campaigns,ȱ andȱ theȱ provisionȱ ofȱ improved,ȱ andȱ
perhapsȱmoreȱtargeted,ȱservices.ȱFurthermore,ȱmoreȱeffectiveȱTaxȱOfficeȱactionȱ
mayȱ beȱ achievedȱ sometimesȱ byȱ usingȱ dataȱ matchingȱ andȱ analyticsȱ inȱ

96
conjunctionȱ withȱ relatedȱ mattersȱ suchȱ asȱ debtȱ identificationȱ andȱ collection,ȱ
lodgementȱenforcementȱand/orȱrulingsȱandȱlegislativeȱchange.ȱȱ
4.12 TheȱANAOȱconsideredȱtheȱTaxȱOffice’sȱactionsȱsinceȱ2000ȱinȱrelationȱtoȱ
theȱlegalȱprofessionȱareȱaȱgoodȱillustrationȱofȱaȱsuccessfulȱTaxȱOfficeȱcampaignȱ
whichȱ aimedȱ toȱ rectifyȱ seriousȱ problemsȱ ofȱ nonȬcomplianceȱ andȱ achieveȱ
improvedȱindustryȱwideȱcompliance.ȱDataȱmatchingȱwasȱintegralȱtoȱtheȱresultsȱ
theȱ Taxȱ Officeȱ hasȱ achieved,ȱ butȱ theȱ overallȱ successȱ dependedȱ uponȱ aȱ wideȱ
rangeȱofȱTaxȱOfficeȱactionsȱoperatingȱsynergistically.ȱȱ
4.13 AsȱnotedȱinȱpreviousȱAuditorȬGeneralȱandȱotherȱreports,ȱdataȱmatchingȱ
canȱ assistȱ theȱ Taxȱ Officeȱ achieveȱ significantȱ improvementsȱ inȱ theȱ levelsȱ ofȱ
complianceȱ amongstȱ taxpayers.ȱ Thisȱ isȱ revealedȱ inȱ theȱ improvedȱ levelsȱ ofȱ
complianceȱ nowȱ occurringȱ inȱ theȱ legalȱ professionȱ asȱ aȱ resultȱ ofȱ theȱ legalȱ
professionȱprojectȱestablishedȱbyȱtheȱTaxȱOfficeȱinȱresponseȱtoȱtheȱfindingsȱandȱ
recommendationsȱ ofȱ Auditȱ Reportȱ No.ȱ 23ȱ 1999–00,ȱ Managementȱ ofȱ Taxȱ Debtȱ
Collection.ȱ Sinceȱ theȱ establishmentȱ ofȱ thatȱ project,ȱ thereȱ hasȱ beenȱ aȱ significantȱ
improvementȱinȱtheȱlevelsȱofȱcomplianceȱthroughoutȱtheȱlegalȱprofession.ȱDataȱ
matchingȱhasȱbeenȱintegralȱtoȱthisȱresult.ȱȱ
4.14 Duringȱ 1998–99ȱ atȱ theȱ timeȱ ofȱ theȱ taxȱ debtȱ collectionȱ audit,ȱ overȱȱ
20ȱ perȱ centȱ ofȱ taxpayersȱ inȱ theȱ legalȱ professionȱ wereȱ taxȱ debtorsȱ whenȱ theȱ
averageȱ levelȱ ofȱ debtȱ perȱ occupationȱ wasȱ onlyȱ 2.6ȱ perȱ cent.ȱ Thereȱ wereȱ alsoȱ
seriousȱproblemsȱofȱnonȬlodgement,ȱlateȱlodgementȱandȱpersistentȱtaxȱdebtors.ȱȱ
4.15 TheȱTaxȱOfficeȱadvisedȱthatȱthereȱareȱnoȱnewȱinstancesȱofȱdebtorsȱbeingȱ
bankruptedȱ repeatedlyȱ inȱ theȱ legalȱ professionȱ likeȱ thoseȱ describedȱ inȱ Auditȱ
ReportȱNo.23ȱ1999–00.ȱLodgementȱandȱdebtorȱbehaviourȱhasȱalsoȱsignificantlyȱ
improvedȱasȱshownȱinȱtheȱsummaryȱinȱTableȱ4.1ȱbelow.ȱȱ

97
Table 4.1
Results of the legal profession project
Data Matching and Tax Compliance Improvement
Data Matching has proven useful to the Australian Taxation Office to assess the tax compliance
of members of the Legal Profession and to help the profession improve its performance in
meeting its tax obligations.
The Tax Office observed significant numbers of legal professionals failing to lodge income tax
returns and not paying tax debts. It was felt that a systemic problem may exist within the
profession with respect to taxation obligations.
The Tax Office first obtained details of all Barristers and Solicitors with practising certificates and
all active members of the Judiciary. This information was used to ensure that all lawyers and
members of the Judiciary were registered with the tax system by having Tax File Numbers, and
then to determine how well the profession as a whole was performing with respect to lodgement
of documents and payment of tax.
The acquisition of the data was valuable in gaining a more complete picture of the profession as
it provided an up to date snapshot, unhampered by information gaps in the information available
in the tax system which occur when taxpayers fail to meet their obligations.
The Tax Office identified a small number of lawyers who were not properly registered and
substantial numbers who had failed to meet other tax obligations, in particular lodgement of
income tax returns.
In addition to pursuing lodgement for returns outstanding, the Tax Office was able to use the
total industry picture to demonstrate to the regulators of the profession that problems existed and
through a series of meetings strategies were developed to address the situation co-operatively.
By taking this holistic approach the Tax Office and the profession have been able to encourage
non-compliant legal professionals to get their tax affairs in order. The Tax Office has
collaborated on educational programs that fit into the existing professional programs to build
strong understanding of responsibilities for the future. The Tax Office has provided information
that can be used in articles in professional and association magazines. Where necessary the
Tax Office has pursued cases individually. The approach has seen the Tax Office developing
global responses to the issues identified.
The Tax Office has also looked at the links between legal firms, self-managed super funds and
service trusts and the individuals connected to them to determine the compliance of entities
associated with the profession.
The results of these activities have been a decline in the number of overdue income tax returns
for legal professionals and a reduction in the rate of growth of the debt for the profession as a
whole.
Source: Tax Office
4.16 Theȱfollowingȱchartȱshowsȱtheȱimprovementȱduringȱtheȱ2006–07ȱyearȱinȱ
theȱlodgementȱofȱlawyers’ȱincomeȱtaxȱreturnsȱinȱrespectȱtoȱtheȱ1998–2005ȱyearsȱ
ofȱincome.ȱ

98
Figure 4.1
Lodgement of lawyers income tax returns
Legal professionals
18.0% 360,000,000
16.0% 350,000,000
% wit h overdue ret urns
14.0% 340,000,000
12.0%
330,000,000
10.0%
320,000,000
8.0%
310,000,000
6.0%
4.0% 300,000,000
2.0% 290,000,000
0.0% 280,000,000
Jul-06 Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul-0 7
06 06 06 06 06 07 07 07 07 07 07
% overdue Debt Balance

ȱ
Source: Tax Office
4.17 Theȱ chartȱ shownȱ inȱ Figureȱ 4.2ȱ comparesȱ theȱ movementȱ overȱ timeȱ ofȱ
voluntaryȱcomplianceȱinȱbothȱdebtȱandȱlodgementȱofȱincomeȱtaxȱreturns.ȱTheȱ
percentageȱ ofȱ overdueȱ returnsȱ reflectsȱ theȱ positionȱ atȱ theȱ outsetȱ ofȱ eachȱ newȱ
financialȱ yearȱ showingȱ aȱ trendȱ decreaseȱ inȱ legalȱ professionalsȱ whoȱ areȱ
expectedȱtoȱlodgeȱandȱdoȱnotȱlodgeȱonȱtime.ȱThisȱdoesȱnotȱreflectȱtheȱadditionalȱ
directȱ impactȱ ofȱ complianceȱ activitiesȱ toȱ pursueȱ lodgement,ȱ whichȱ
substantiallyȱ reducesȱ theȱ numberȱ ofȱ overdueȱ returnsȱ overȱ theȱ courseȱ ofȱ eachȱ
year.ȱȱ

99
Figure 4.2
Legal Profession voluntary compliance in debt and lodgement of income
tax returns.
Legal Profession - Improvement in Voluntary Tax

Compliance
350 24
commencement of financial year

% of Legal Professionals with
23
300 22
overdue returns at
Total Debt ($m)
21
250 20
19
200 18
17
150 16
15
100 14
Jul-04 Jul-05 Jul-06 Jul-07
Total Debt ($m) Non Lodgers (%)

ȱ
Source: Tax Office
Performance monitoring
Health of the System Assessments
4.18 Theȱ Taxȱ Officeȱ conductsȱ anȱ annualȱ Healthȱ ofȱ theȱ Systemȱ Assessmentsȱ
(HOTSA)ȱprocess,ȱtoȱassessȱtheȱ‘health’ȱofȱtheȱrevenueȱsystemȱwithȱrespectȱtoȱ
theȱ entireȱ organisation,ȱ andȱ itsȱ componentsȱ suchȱ asȱ particularȱ revenueȱ typesȱ
(e.g.ȱGST,ȱincomeȱtax),ȱmarketȱsegmentsȱ(e.g.ȱindividuals,ȱlargeȱbusinesses)ȱorȱ
riskȱareasȱ(e.g.ȱaggressiveȱtaxȱplanning).ȱȱ
4.19 Theȱ DMSCȱ hasȱ beenȱ coordinatingȱ andȱ facilitatingȱ dataȱ matchingȱ
projectsȱ usingȱ requisitionedȱ dataȱ sinceȱ 2003–04.ȱ Inȱ 2005ȱ theȱ DMSCȱ initiatedȱ
andȱ facilitatedȱ anȱ informalȱ crossȱ businessȱ lineȱ dataȱ matchingȱ riskȱ workshop,ȱ
theȱoutputȱofȱwhichȱwasȱaȱdraftȱDataȱMatchingȱHOTSA. 84 ȱTheȱscopeȱofȱtheȱDataȱ
MatchingȱHOTSAȱalsoȱincludedȱdataȱacquisitionȱandȱidentityȱmatching.ȱItȱdidȱ
notȱ includeȱ analyticsȱ asȱ thatȱ functionȱ wasȱ beingȱ establishedȱ atȱ theȱ time.ȱ Theȱ
TaxȱOfficeȱadvisedȱtheȱDMSCȱconsideredȱthatȱanalyticsȱwasȱoutsideȱtheȱscopeȱ
ofȱtheȱinformalȱHOTSA.ȱTheȱANAOȱconsidersȱtheȱDMSC’sȱdevelopmentȱofȱtheȱ
Dataȱ Matchingȱ HOTSAȱ wasȱ aȱsoundȱ initiative,ȱ asȱ theȱ processȱ byȱ whichȱ itȱ wasȱ
84
This HOTSA remains a draft as it was not corporately initiated or endorsed.

100
developedȱ focusedȱ attentionȱ onȱ dataȱ acquisition,ȱ identityȱ matchingȱ andȱ dataȱ
matchingȱ withinȱ theȱ Taxȱ Office,ȱ andȱ strengthenedȱ crossȱ businessȱ lineȱ
understandingȱandȱinformationȱsharing.ȱItȱfacilitatedȱbusinessȱlinesȱaddressingȱ
manyȱ ofȱ theȱ keyȱ concernsȱ raisedȱ byȱ theȱ processȱ andȱ helpedȱ theȱ Taxȱ Officeȱ
makeȱ betterȱ andȱ moreȱ corporateȱ andȱ strategicȱ useȱ ofȱ dataȱ matching.ȱ Theȱ
resultantȱdocumentȱcontainedȱaȱnumberȱofȱdraftȱrecommendationsȱidentifyingȱ
opportunitiesȱ forȱ improvement.ȱ Theȱ Dataȱ Matchingȱ HOTSAȱ wasȱ notȱ repeatedȱ
inȱ2006,ȱhoweverȱtheȱTaxȱOfficeȱadvisedȱthatȱinȱJulyȱ2007ȱitȱconductedȱaȱsecondȱ
crossȱbusinessȱlineȱdataȱmatchingȱriskȱworkshop.ȱ
4.20 Theȱ ANAOȱ foundȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ practicesȱ areȱ wellȱ
established.ȱTheȱANAOȱconsideredȱthat,ȱgivenȱtheȱincreasedȱincidenceȱofȱdataȱ
matchingȱandȱanalyticsȱworkȱoverȱtheȱlastȱfiveȱyears,ȱtheȱplannedȱintroductionȱ
ofȱ theȱ ECMPȱ Changeȱ Program,ȱ andȱ theȱ demonstrableȱ synergiesȱ betweenȱ dataȱ
matchingȱ andȱ analyticsȱ methodologies,ȱ thereȱ isȱ meritȱ inȱ theȱ Taxȱ Officeȱ
consolidatingȱ corporateȱ understandingȱ ofȱ dataȱ matchingȱ andȱ analytics,ȱ theȱ
achievementsȱ madeȱ andȱ theȱ lessonsȱ learntȱ fromȱ dataȱ matchingȱ andȱ analytics.ȱ
Thisȱcouldȱbeȱdoneȱbyȱconductingȱaȱhighȱlevelȱstocktakeȱofȱdataȱmatchingȱandȱ
analyticsȱ activitiesȱ relevantȱ toȱ improvingȱ theȱ corporateȱ andȱ strategicȱ
managementȱ ofȱ theȱ capability.ȱ ANAOȱ notedȱ thatȱ theȱ informalȱ Dataȱ Matchingȱ
HOTSAȱ alsoȱ consideredȱ thatȱ aȱ stocktakeȱ ofȱ theȱ Taxȱ Office’sȱ dataȱ matchingȱ
capabilitiesȱwasȱwarranted.ȱȱ
Recommendation No.6
4.21 Toȱ improveȱ theȱ efficiencyȱ andȱ effectivenessȱ ofȱ theȱ corporateȱ andȱ
strategicȱ managementȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ andȱ
informȱtheȱfurtherȱdevelopmentȱofȱtheȱcapability,ȱtheȱANAOȱrecommendsȱthatȱ
theȱ Taxȱ Officeȱ completeȱ aȱ highȱ levelȱ ‘stockȱ take’ȱ ofȱ achievementsȱ andȱ lessonsȱ
learnedȱfromȱitsȱdeployment.ȱȱ
4.22 ATOȱResponse:ȱAgreed.ȱȱ
Compliance Effectiveness Measures Project
4.23 Theȱ ANAOȱ notedȱ thatȱ theȱ Taxȱ Officeȱ hasȱ initiatedȱ aȱ Complianceȱ
EffectivenessȱMeasuresȱproject.ȱTheȱaimȱofȱthisȱprojectȱisȱtoȱdevelopȱaȱcorporateȱ
frameworkȱ thatȱ wouldȱ enableȱ theȱ Taxȱ Officeȱ toȱ measureȱ theȱ changeȱ inȱ
taxpayers’ȱcomplianceȱresultingȱfromȱitsȱactivities.ȱWhileȱthisȱprojectȱdoesȱnotȱ
specificallyȱ addressȱ theȱ effectivenessȱ ofȱ theȱ Taxȱ Office’sȱ managementȱ ofȱ theȱ
dataȱ matchingȱ andȱ analyticsȱ capability,ȱ theȱ ANAOȱ consideredȱ itȱ mayȱ beȱ

101
advantageousȱtoȱadaptȱtheȱforthcomingȱframeworkȱtoȱtheȱmeasurementȱofȱtheȱ
efficiencyȱandȱeffectivenessȱofȱtheȱmanagementȱofȱtheȱcapability.ȱ
Evaluation
4.24 AsȱpartȱofȱtheȱDMSC’sȱcontinuousȱimprovementȱapproachȱtoȱitsȱduties,ȱ
aȱ DMSCȱ subcommitteeȱ conductsȱ workȬinȬprogressȱ andȱ projectȱ closureȱ
evaluationsȱ ofȱ theȱ dataȱ matchingȱ projectsȱ thatȱ useȱ requisitionedȱ data.ȱ Theseȱ
reviewsȱhaveȱprovedȱbeneficialȱtoȱtheȱTaxȱOffice.ȱȱ
4.25 Theȱ Taxȱ Officeȱ doesȱ notȱ taskȱ theȱ DMSCȱ toȱ evaluateȱ theȱ Taxȱ Offices’ȱ
legislatedȱdataȱmatchingȱactivities.ȱTheȱTaxȱOfficeȱexplainedȱthatȱthisȱroleȱwasȱ
oneȱofȱtheȱnormalȱevaluativeȱtasksȱofȱbusinessȱlines.ȱȱ
Cost effectiveness
4.26 Theȱ Dataȱ Matchingȱ Conceptȱ Briefȱ andȱ Dataȱ Matchingȱ Programȱ Protocolȱ
preparedȱbyȱtheȱprojectsȱthatȱmatchȱrequisitionedȱdataȱincludeȱanȱestimateȱofȱ
theȱ costsȱ andȱ benefitsȱ (qualitativeȱ andȱ quantitative)ȱ forȱ eachȱ project.ȱ Onȱ
conclusionȱ ofȱ aȱ project,ȱ aȱ Dataȱ Matchingȱ Protocolȱ Evaluationȱ Reportȱ isȱ alsoȱ
preparedȱ forȱ theȱ Privacyȱ Commissioner,ȱ whichȱ includesȱ aȱ compilationȱ ofȱ theȱ
costsȱ andȱ benefits,ȱ andȱ anȱ attemptȱ toȱ assessȱ theȱ overallȱ effectivenessȱ ofȱ theȱ
projectȱinȱrelationȱtoȱoriginalȱobjectives.ȱȱ
4.27 Theȱ ANAOȱ conductedȱ anȱ analysisȱ ofȱ aȱ sampleȱ ofȱ conceptȱ briefs,ȱ
programȱprotocolsȱandȱevaluationȱreports,ȱandȱfound:ȱ
x inȱ someȱ cases,ȱ theȱ costȱ andȱ benefitȱ estimatesȱ identifiedȱ inȱ aȱ project’sȱ
Dataȱ Matchingȱ Programȱ Protocolȱ followedȱ aȱ genericȱ proȬforma,ȱ andȱ didȱ
notȱincludeȱprojectȬspecificȱestimates;ȱ
x projectsȱ usedȱ differingȱ approachesȱ andȱ methodsȱ whenȱ estimatingȱ aȱ
project’sȱcostsȱandȱbenefitsȱinȱtheȱDataȱMatchingȱConceptȱBriefs;ȱ
x asȱ dataȱ acquisitionȱ andȱ useȱ compriseȱ oneȱ elementȱ ofȱ aȱ project,ȱ theȱ
specificȱ costsȱ andȱ benefitsȱ relatingȱ toȱ theseȱ activitiesȱ wereȱ notȱ alwaysȱ
separatelyȱidentifiedȱandȱestimatedȱinȱtheȱDataȱMatchingȱConceptȱBriefsȱ
andȱDataȱMatchingȱProgramȱProtocols;ȱȱ
x projectsȱ usedȱ differingȱ approachesȱ andȱ methodsȱ whenȱ reportingȱ theȱ
project’sȱ costsȱ andȱ benefitsȱ inȱ theȱ Dataȱ Matchingȱ Protocolȱ Evaluationȱ
Reports;ȱandȱ
x estimatesȱ andȱ evaluationsȱ wereȱ undertakenȱ onȱ aȱ projectȬbyȬprojectȱ
basis,ȱandȱwereȱnotȱintegratedȱtoȱgiveȱaȱwholeȬofȬTaxȱOfficeȱpictureȱofȱ

102
theȱcostsȱandȱbenefitsȱassociatedȱwithȱdataȱacquisitionȱandȱuseȱin,ȱsay,ȱ
givenȱtimeframes.ȱȱ
4.28 Theȱ ANAOȱ sawȱ meritȱ inȱ placingȱ theȱ Taxȱ Office’sȱ costȱ benefitȱ analysisȱ
onȱ aȱ moreȱ disciplinedȱ footingȱ andȱ extendingȱ itȱ toȱ takeȱ aȱ wholeȬofȬTaxȱ Officeȱ
perspective.ȱThereȱmayȱbeȱscopeȱforȱtheȱTaxȱOfficeȱtoȱapplyȱsomeȱofȱtheȱrigourȱ
ofȱcostȱbenefitȱanalysisȱorȱcostȱeffectivenessȱanalysisȱtoȱtheȱperiodicȱevaluationȱ
ofȱ dataȱ matchingȱ andȱ analyticsȱ projects. 85 ȱ Introducingȱ aȱ moreȱ rigorousȱ
approachȱ toȱ theȱ costȱ benefit/costȱ effectivenessȱ evaluationȱ ofȱ theȱ Taxȱ Office’sȱ
managementȱofȱtheȱdataȱmatchingȱandȱanalyticsȱcapabilityȱcouldȱimproveȱtheȱ
strategicȱvalueȱofȱthisȱcapabilityȱtoȱCommonwealthȱadministration.ȱȱ
4.29 Asȱ previouslyȱ noted,ȱ addressingȱ theȱ measurementȱ andȱ attributionȱ
difficultiesȱ inȱ thisȱ areaȱ mayȱ presentȱ challengesȱ toȱ theȱ adoptionȱ ofȱ standardȱ
financial,ȱ economicȱ and/orȱ socialȱ scienceȱ evaluationȱ methodologiesȱ toȱ uniqueȱ
aspectsȱ ofȱ taxȱ administration.ȱ Inȱ addition,ȱ thereȱ areȱ significantȱ differencesȱ
amongstȱtheȱwideȱrangeȱofȱdataȱmatchingȱandȱanalyticsȱmethodologies.ȱAtȱthisȱ
operationalȱ level,ȱ thereȱ mayȱ notȱ beȱ scopeȱ toȱ applyȱ aȱ standardȱ evaluationȱ
methodology.ȱ However,ȱ thereȱ wouldȱ beȱ scopeȱ toȱ applyȱ aȱ moreȱ rigorous,ȱ
disciplinedȱ approach,ȱ perhapsȱ usingȱ aȱ rangeȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ
methodologyȱ evaluationȱ techniques.ȱ Thereȱ will,ȱ therefore,ȱ necessarilyȱ beȱ
differencesȱinȱtheȱevaluationȱtechniquesȱrelevantȱtoȱeach.ȱȱ
4.30 Itȱ mayȱ seemȱ thatȱ theȱ manyȱ differencesȱ meanȱ thatȱ aȱ moreȱ disciplinedȱ
approachȱ toȱ theȱ evaluationȱ ofȱ dataȱ matchingȱ andȱ analyticsȱ methodologiesȱ
couldȱnotȱbeȱachieved.ȱTheȱANAOȱconsideredȱthisȱunlikelyȱandȱsuggestedȱthatȱ
theȱ likelyȱ advantagesȱ toȱ taxȱ administrationȱ fromȱ theȱ adoptionȱ ofȱ aȱ moreȱ
disciplinedȱ andȱ rigorousȱ evaluativeȱ frameworkȱ wouldȱ outweighȱ anyȱ
disadvantages.ȱȱ
4.31 Ifȱevaluationȱisȱfocussedȱmoreȱstrategicallyȱonȱtheȱrelationshipȱbetweenȱ
theȱ objectivesȱ toȱ whichȱ theȱ useȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capabilityȱ
hasȱ beenȱ appliedȱ ratherȱ thanȱ microȱ aspectsȱ ofȱ methodologiesȱ orȱ techniques,ȱ
informationȱ couldȱ beȱ generatedȱ thatȱ wouldȱ beȱ usefulȱ toȱ theȱ assessmentȱ ofȱ
valueȱ forȱ moneyȱ achievedȱ byȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capability.ȱ
Amongȱ otherȱ things,ȱ thereȱ isȱ scopeȱ forȱ theȱ Taxȱ Officeȱ toȱ haveȱ improvedȱ
proceduresȱ forȱ measuringȱ theȱ efficiencyȱ andȱ effectivenessȱ ofȱ theȱ roleȱ ofȱ dataȱ
matchingȱ andȱ analyticsȱ capabilityȱ inȱ taxȱ administration.ȱ Theȱ useȱ ofȱ theȱ
85
See the Department of Finance and Administration’s Financial Management Reference Series, No.5
Introduction to Cost–Benefit Analysis and Alternative Evaluation Methodologies (2006) and No.6
Handbook of Cost–Benefit Analysis (2006).

103
improvedȱ evaluationȱ couldȱ produceȱ betterȱ highȱ levelȱ informationȱ usefulȱ forȱ
resourceȱmanagementȱinȱrelationȱto,ȱforȱexample,ȱtheȱallocationȱofȱresourcesȱtoȱ
dataȱ matchingȱ andȱ analyticsȱ ratherȱ thanȱ otherȱ strategiesȱ toȱ achieveȱ theȱ
outcomesȱ ofȱ taxȱ administration.ȱ Thisȱ couldȱ proveȱ usefulȱ toȱ riskȱ owners,ȱ
relevantȱ subȬplanȱ managersȱ andȱ seniorȱ businessȱ lineȱ staffȱ whoȱ haveȱ theȱ
responsibilityȱ toȱ applyȱ resourcesȱ mostȱ costȬeffectivelyȱ toȱ achieveȱ Taxȱ Officeȱ
outcomes.ȱȱ
4.32 TheȱANAOȱnotesȱtheȱdraftȱDataȱMatchingȱHOTSAȱalsoȱconsideredȱthereȱ
wasȱaȱneedȱtoȱunderstandȱtheȱcostȱofȱdataȱmatchingȱfromȱaȱwholeȬofȬTaxȱOfficeȱ
perspective.ȱTheȱdraftȱHOTSAȱrecommendedȱthat,ȱ‘Theȱ[TaxȱOffice]ȱalsoȱneedsȱtoȱ
betterȱunderstandȱtheȱinvestmentȱinȱdataȱmatchingȱactivitiesȱacrossȱtheȱ[TaxȱOffice].ȱAȱ
pilotȱmodelȱneedsȱtoȱbeȱtrialledȱtoȱcostȱactivitiesȱ(p.14)‘.ȱ
4.33 Aȱ furtherȱ considerationȱ isȱ theȱ needȱ forȱ theȱ Taxȱ Officeȱ toȱ estimateȱ theȱ
benefits,ȱ ifȱ any,ȱ (suchȱ asȱ reducedȱ costsȱ orȱ otherȱ savings)ȱ thatȱ taxpayersȱ mayȱ
achieveȱ asȱ aȱ resultȱ ofȱ initiativesȱ enabledȱ byȱ dataȱ matchingȱ andȱ analyticsȱ toȱ
makeȱ complianceȱ easierȱ andȱ cheaperȱ forȱ them.ȱ Theȱ needȱ toȱ doȱ thisȱ mayȱ
becomeȱ moreȱ compellingȱ ifȱ theȱ Taxȱ Officeȱ wishesȱ toȱ evaluateȱ theȱ extentȱ toȱ
whichȱ theȱ provisionȱ ofȱ newȱ andȱ betterȱ services,ȱ someȱ enabledȱ byȱ dataȱ
matchingȱandȱanalytics,ȱmakeȱcomplianceȱwithȱtaxȱobligationsȱeasier,ȱcheaperȱ
andȱmoreȱpersonalised,ȱasȱisȱintendedȱbyȱtheȱECMPȱChangeȱProgram.ȱȱ
Reporting
4.34 Theȱ DMSCȱ receivesȱ anȱ annualȱ performanceȱ reportȱ fromȱ theȱ Dataȱ
Matchingȱ Gatekeeper,ȱ whoȱ reportsȱ onȱ theȱ progressȱ ofȱ theȱ dataȱ matchingȱ
projectsȱusingȱrequisitionedȱdataȱlistedȱinȱtheȱComplianceȱPlanȱandȱvariousȱadȱ
hocȱreportsȱfromȱtheȱIdentityȱMatchingȱteamȱandȱbusinessȱlinesȱonȱanȱasȬneedsȱ
basis.ȱ Theȱ DMSCȱ isȱ phasingȱ outȱ theȱ receiptȱ ofȱ progressȱ reportsȱ aboutȱ
implementationȱofȱtheȱrecommendationsȱfromȱAuditȱReportȱNo.48ȱofȱ2003–04ȱ
aboutȱmanagingȱAIIRȱdata,ȱandȱdoesȱnotȱreceiveȱreportsȱaboutȱdataȱmatchingȱ
usingȱotherȱlegislatedȱdataȱsets.ȱ
4.35 PriorȱtoȱMarchȱ2007,ȱtheȱDMSCȱwasȱtheȱpeakȱbodyȱinȱtheȱareaȱofȱdataȱ
acquisition,ȱ identityȱ matchingȱ andȱ dataȱ matching.ȱ Inȱ Marchȱ 2007,ȱ theȱ Taxȱ
Officeȱ Executiveȱ determinedȱ thatȱ theȱ DMSCȱ reportȱ toȱ theȱ Complianceȱ
Executiveȱ Meeting;ȱ however,ȱ futureȱ reportingȱ requirementsȱ wereȱ notȱ
determined.ȱȱ
4.36 Theȱ ANAOȱ consideredȱ thatȱ routineȱ highȱ levelȱ trendȱ analysisȱ reportsȱ
mayȱhelpȱtheȱrelevantȱsubȬplanȱmanagers,ȱbusinessȱlineȱriskȱownersȱandȱseniorȱ

104
businessȱlineȱmanagementȱandȱtheȱTaxȱOfficeȱExecutiveȱmonitorȱtheȱsuccessȱofȱ
dataȱmatchingȱandȱanalyticsȱactivitiesȱandȱidentifyȱareasȱforȱimprovement.ȱTheȱ
ANAOȱ suggestedȱ thatȱ thereȱ wouldȱ beȱ meritȱ ifȱ theseȱ reportsȱ coveredȱ
appropriateȱ componentsȱ ofȱ theȱ dataȱ matchingȱ andȱ analyticsȱ capability,ȱ
includingȱidentityȱmatching,ȱdataȱmatchingȱ(usingȱlegislated,ȱmemorandumȱofȱ
understandingȱandȱrequisitionedȱdata)ȱandȱanalytics.ȱThisȱcouldȱbeȱachievedȱif,ȱ
forȱ example,ȱ businessȱ lines,ȱ theȱ DMSCȱ andȱ theȱ CKOȱ allȱ usedȱ commonȱ
evaluationȱ methodologies,ȱ atȱ leastȱ atȱ theȱ strategicȱ endȱ ofȱ highȱ levelȱ trendȱ
analysis,ȱandȱ coordinatedȱ theirȱ reportingȱ arrangementsȱsoȱthatȱ theȱ Taxȱ Officeȱ
Executive,ȱ relevantȱ subȬplanȱ managers,ȱ businessȱ lineȱ riskȱ ownersȱ andȱ seniorȱ
businessȱ lineȱ managementȱ receivedȱ aȱ moreȱ integratedȱ andȱ comprehensiveȱ
report.ȱȱ
Guidance to Tax Office staff

4.37 Theȱ DMSCȱ providedȱ dataȱ matchingȱ guidanceȱ toȱ Taxȱ Officeȱ staffȱ
throughȱ publicationȱ ofȱ aȱ dataȱ matchingȱ practiceȱ statement,ȱ publishingȱ dataȱ
matchingȱinformationȱonȱtheȱTaxȱOffice’sȱintranetȱandȱinȱinternalȱnewsletters,ȱ
andȱ creatingȱ aȱ dataȱ matchingȱ gatekeeperȱ positionȱ toȱ adviseȱ staff,ȱ whereȱ
required.ȱThisȱguidanceȱhasȱenabledȱtheȱTaxȱOfficeȱtoȱachieveȱcomplianceȱwithȱ
theȱ Dataȱ Matchingȱ Guidelines.ȱ Theȱ DMSCȱ providedȱ dataȱ matchingȱ projectȱ
leadersȱ withȱ templatesȱ toȱ useȱ inȱ preparingȱ Dataȱ Matchingȱ Conceptȱ Briefsȱ andȱ
DataȱMatchingȱProgramȱProtocols.ȱTheȱTaxȱOfficeȱintroducedȱtighterȱcontrolsȱonȱ
theȱ developmentȱ andȱ considerationȱ ofȱ dataȱ matchingȱ opportunities,ȱ andȱ
broughtȱ dataȱ matchingȱ strategiesȱ toȱ businessȱ lineȱ managers’ȱ attention,ȱ
facilitatingȱanȱimprovedȱwholeȬofȬTaxȱOfficeȱandȱwholeȬofȬtaxpayerȱapproach.ȱȱ
4.38 Nevertheless,ȱaȱrangeȱofȱissuesȱemergedȱinȱrecentȱyearsȱforȱwhichȱstaffȱ
needȱfurtherȱguidance.ȱTheȱDMSCȱandȱtheȱGatekeeperȱprovideȱadviceȱtoȱstaffȱ
onȱ anȱ adȱ hocȱ basisȱ aboutȱ keyȱ dataȱ acquisitionȱ matters,ȱ includingȱ quality,ȱ
format,ȱandȱtimeliness.ȱHowever,ȱitȱmayȱbeȱmoreȱefficientȱforȱtheȱTaxȱOfficeȱtoȱ
issueȱ genericȱ guidanceȱ aboutȱ theseȱ matters.ȱ Itȱ mayȱ beȱ appropriate,ȱ therefore,ȱ
forȱ theȱ Taxȱ Officeȱ toȱ issueȱ dataȱ acquisitionȱ guidanceȱ toȱ staff.ȱ DMSC,ȱ inȱ
consultationȱwithȱtheȱOCKOȱandȱbusinessȱlines,ȱcouldȱprepareȱthisȱguidance.ȱ
4.39 Taxȱ agentsȱ haveȱ aȱ criticalȱ roleȱ inȱ theȱ improvementȱ ofȱ complianceȱ
amongstȱtaxpayers.86 ȱ Givenȱ theȱ relianceȱ onȱ taxȱ agentsȱ byȱ theȱ community,ȱ theȱ
ANAOȱ notedȱ thatȱ dataȱ matchingȱ inȱ relationȱ toȱ taxpayersȱ hasȱ aȱ dualȱ roleȱ inȱ
86
See Audit Report No.30 2006–07 The Australian Taxation Office’s Management of its Relationship with
Tax Practitioners: Follow-up Audit.

105
relationȱ toȱ taxȱ agents.ȱ Theȱ dualȱ roleȱ arisesȱ becauseȱ complianceȱ issues,ȱ
especiallyȱthoseȱofȱaȱmoreȱserousȱkind,ȱarisingȱfromȱtheȱactivitiesȱofȱtaxpayers,ȱ
mayȱ indicateȱ complianceȱ concernsȱ inȱ relationȱ toȱ taxȱ agents.ȱ Furthermore,ȱ
informationȱaboutȱcomplianceȱshortcomingsȱinȱtheȱreturnsȱofȱtaxpayersȱcanȱbeȱ
usedȱ byȱ theȱ Taxȱ Officeȱ toȱ helpȱ taxȱ agentsȱ manageȱ theirȱ businessesȱ moreȱ
efficientlyȱandȱeffectively.ȱBecauseȱofȱthisȱdualȱrole,ȱtheȱANAOȱconsideredȱtheȱ
TaxȱOfficeȱshouldȱuseȱanyȱdataȱmatchingȱactivityȱthatȱfocusesȱonȱtaxpayersȱtoȱ
produceȱ informationȱ relevantȱ toȱ addressingȱ theseȱ twoȱ concernsȱ aboutȱ taxȱ
agents.ȱ Thisȱ shouldȱ helpȱ theȱ Taxȱ Officeȱ betterȱ identifyȱ taxȱ agentȱ specificȱ
complianceȱrisks,ȱespeciallyȱthoseȱofȱtheȱmoreȱseriousȱkind.ȱItȱwillȱalsoȱhelpȱtheȱ
Taxȱ Officeȱ assistȱ taxȱ agentsȱ toȱ betterȱ understandȱ complianceȱ problemsȱ ofȱ
taxpayersȱ andȱ someȱ taxȱ agentsȱ specifically,ȱ especiallyȱ thoseȱ whoȱ lodgedȱ theȱ
returnsȱ ofȱ theȱ taxpayersȱ thatȱ dataȱ matchingȱ hasȱ revealedȱ asȱ presentingȱ
complianceȱrisks.ȱ
4.40 Theȱ ANAOȱ notedȱ theȱ benefitsȱ ofȱ theȱ templatesȱ issuedȱ byȱ theȱ DMSCȱ
andȱ usedȱ toȱ prepareȱ Dataȱ Matchingȱ Conceptȱ Briefȱ andȱ Dataȱ Matchingȱ Programȱ
Protocol.ȱHowever,ȱtheȱANAOȱconsideredȱthatȱthereȱwasȱscopeȱtoȱimproveȱtheȱ
DataȱMatchingȱConceptȱBriefȱbyȱaddingȱtoȱtheȱtemplatesȱsoȱasȱto:ȱ
x requireȱprojectȱmanagersȱtoȱtakeȱaȱwholeȬofȬTaxȱOfficeȱ(and/orȱwholeȬ
ofȬclient)ȱperspective;ȱ
x includeȱ aȱ rigorousȱ processȱ forȱ obtainingȱ consultationȱ commentsȱ fromȱ
allȱbusinessȱlinesȱandȱrelevantȱdataȱstewardsȱagainstȱaȱrangeȱofȱcriteria;ȱȱ
x integrateȱdataȱmatchingȱandȱanalytics;ȱandȱ
x outlineȱhowȱtheȱprojectȱmightȱbeȱusedȱtoȱprovideȱbetter,ȱincludingȱmoreȱ
personalised,ȱ servicesȱ andȱ makeȱ taxȱ complianceȱ easierȱ (bothȱ beingȱ
goalsȱofȱtheȱECMPȱChangeȱProgramȱinitiative).ȱ
Emerging issues
Online access to legislated and other external data
4.41 TheȱTaxȱ Officeȱcurrentlyȱreceivesȱdata,ȱincludingȱlegislatedȱdata,ȱviaȱ aȱ
multiplicityȱ ofȱ channels.ȱ Thisȱ canȱ beȱ aȱ sourceȱ ofȱ administrativeȱ inefficiency.ȱ
Theȱ ANAOȱ considersȱ thereȱ isȱ aȱ needȱ forȱ theȱ Taxȱ Officeȱ toȱ streamlineȱ dataȱ
acquisition,ȱ thusȱ reducingȱ toȱ theȱ minimumȱ theȱ numberȱ ofȱ channelsȱ throughȱ
whichȱ dataȱ isȱ received.ȱ Theȱ ANAOȱ considersȱ theȱ Taxȱ Officeȱ shouldȱ aimȱ toȱ
obtainȱ legislatedȱ dataȱ onlineȱ asȱ aȱ priority.ȱ Thereȱ isȱ meritȱ inȱ theȱ Taxȱ Officeȱ
havingȱ aȱ strategyȱ toȱ moveȱ toȱ onlineȱ dataȱ receiptȱ toȱ replaceȱ receiptȱ ofȱ dataȱ asȱ
106
tapes,ȱ discsȱ orȱ paper,ȱ especiallyȱ forȱ legislatedȱ data,ȱ butȱ potentiallyȱ forȱ manyȱ
thirdȱ partyȱ datasets.ȱ Theȱ Taxȱ Office’sȱ Channelȱ Strategy 87 ȱ couldȱ provideȱ
guidance.ȱ Itȱ was,ȱ however,ȱ developedȱ withȱ aȱ focusȱ onȱ communicationsȱ
betweenȱtheȱTaxȱOffice,ȱtaxpayersȱandȱtaxȱagentsȱinȱrelationȱtoȱtaxȱreturnsȱandȱ
mattersȱdirectlyȱrelatedȱtoȱthese.ȱȱ
4.42 Coupledȱ withȱ improvedȱ timelinessȱ ofȱ accessȱ toȱ theȱ data,ȱ whichȱ onlineȱ
accessȱcouldȱenable,ȱtheȱTaxȱOfficeȱcouldȱhaveȱgreaterȱscopeȱtoȱtakeȱimmediateȱ
actionȱ onȱ suspectedȱ seriousȱ nonȱ compliance.ȱ Underȱ currentȱ arrangements,ȱ
apartȱ fromȱ problemsȱ ofȱ dataȱ quality,ȱ thereȱ canȱ beȱ substantialȱ delaysȱ betweenȱ
theȱ Taxȱ Office’sȱ realisationȱ ofȱ aȱ suspectedȱ nonȱ complianceȱ issueȱ andȱ theȱ
availabilityȱofȱtheȱthirdȱpartyȱdataȱneededȱtoȱtakeȱaction.ȱȱ
Intergovernmental cooperation: strategies for improving the Tax

Office’s ability to use external data
4.43 Inȱ Auditȱ Reportȱ No.16ȱ 2006–07,ȱ theȱ ANAOȱ notedȱ difficultiesȱ theȱ Taxȱ
Officeȱ experiencedȱ inȱ makingȱ optimumȱ useȱ ofȱ realȱ propertyȱ dataȱ becauseȱ ofȱ
difficultiesȱ associatedȱ withȱ identityȱ matchingȱ ofȱ realȱ propertyȱ transactions. 88 ȱ
ThisȱisȱaȱcomponentȱofȱCOAG’sȱNationalȱIdentityȱSecurityȱStrategy.ȱAsȱnotedȱinȱ
Auditȱ Reportȱ No.47ȱ 2004–05, 89 ȱtheȱinternationalȱinterȬgovernmentalȱ body,ȱ theȱ
Financialȱ Actionȱ Taskȱ Force,ȱ identifiedȱ theȱ realȱ propertyȱ dataȱ maintainedȱ byȱ
governmentȱ authoritiesȱ asȱ relevantȱ toȱ managingȱ theȱ risksȱ associatedȱ withȱ
moneyȱlaunderingȱandȱterroristȱfinancing.ȱȱ
4.44 Onȱ 13ȱ Julyȱ 2007,ȱ theȱ AttorneyȬGeneral’sȱ Departmentȱ releasedȱ draftȱ
provisionsȱsettingȱoutȱdesignatedȱservicesȱwhichȱwillȱbeȱcoveredȱbyȱtheȱsecondȱ
trancheȱofȱtheȱAntiȬMoneyȱLaunderingȱandȱCounterȬTerrorismȱFinancingȱActȱ2006.ȱ
Thisȱ secondȱ trancheȱ willȱ require,ȱ amongȱ otherȱ things,ȱ theȱ recordingȱ ofȱ someȱ
realȱ propertyȱ andȱ conveyancingȱ transactionsȱ andȱ advisoryȱ servicesȱ thatȱ meetȱ
specifiedȱcriteria,ȱsuchȱasȱthresholdsȱorȱsuspiciousȱtransactions.ȱTheȱrecord,ȱtoȱ
beȱprovidedȱtoȱtheȱAUSTRAC,ȱandȱtherebyȱformingȱaȱsubsetȱofȱtheȱAUSTRACȱ
database,ȱwillȱidentifyȱfullyȱtheȱproviderȱofȱtheȱserviceȱ(e.g.ȱaȱrealȱestateȱagentȱ
orȱaȱsolicitor),ȱtheȱvendorȱandȱtheȱpurchaser.ȱ
87
See paragraph 3.67 for an explanation about Tax Office’s Channel Strategy.
88
See Audit Report No.16 2006–2007 Administration of Capital Gains Tax Compliance in the Individuals
Market Segment paragraph 3.35 p. 58.
89
See Audit Report No.47 2004–2005 Australian Taxation Office Tax File Number Integrity paragraph 6.52
p. 116.

107
4.45 Theȱ ANAOȱ notesȱ thereȱ areȱ twoȱ broaderȱ issuesȱ concerningȱ theȱ Taxȱ
Office’sȱ efficientȱ accessȱ toȱ dataȱ fromȱ federalȱ andȱ stateȱ governmentȱ agencies.ȱ
Oneȱisȱthatȱofȱinteroperabilityȱbetweenȱinformationȱtechnologyȱsystemsȱatȱtheȱ
federalȱandȱstateȱlevels.ȱTheȱotherȱissueȱisȱthatȱofȱonlineȱreceiptȱofȱdata.ȱȱ
4.46 TheȱTaxȱOfficeȱisȱexaminingȱtheseȱissuesȱatȱtheȱstateȱlevelȱthroughȱtheȱ
Australianȱ Taxationȱ andȱ Revenueȱ Officesȱ Coordinationȱ Forum.ȱ Asȱ well,ȱ theȱ
issuesȱ areȱ beingȱ examinedȱ atȱ theȱ federalȱ andȱ stateȱ levelsȱ inȱ aȱ projectȱ
coordinatedȱbyȱGeosciencesȱAustralia.ȱAspectsȱofȱbothȱareȱalsoȱbeingȱexaminedȱ
asȱ partȱ ofȱ COAG’sȱ Nationalȱ Identityȱ Securityȱ Strategy.ȱ Givenȱ thatȱ theseȱ issuesȱ
(interoperabilityȱ betweenȱ informationȱ technologyȱ systemsȱ atȱ theȱ federalȱ andȱ
stateȱ levelsȱ andȱ theȱ onlineȱ receiptȱ ofȱ data)ȱ areȱ beingȱ examinedȱ byȱ aȱ rangeȱ ofȱ
agenciesȱ andȱ inȱ aȱ numberȱ ofȱ fora,ȱ thereȱ mayȱ beȱ scopeȱ forȱ improvedȱ
examinationȱ ofȱ theseȱ issuesȱ inȱ waysȱ thatȱ wouldȱ beȱ advantageousȱ toȱ taxȱ
administration.ȱȱ
4.47 Theȱ standardȱ businessȱ reportingȱ project,ȱ whichȱ aimsȱ toȱ reduceȱ theȱ
reportingȱ burdenȱ forȱ businessȱthroughȱ eliminatingȱ unnecessaryȱ orȱduplicatedȱ
reporting,ȱmayȱassistȱinȱtheȱdevelopmentȱofȱimprovementsȱwithȱrespectȱtoȱtheȱ
qualityȱofȱrealȱpropertyȱdata,ȱinteroperabilityȱbetweenȱinformationȱtechnologyȱ
systemsȱ atȱ theȱ federalȱ andȱ stateȱ levelsȱ andȱ theȱ Taxȱ Office’sȱ receiptȱ ofȱ onlineȱ
data.ȱȱ
Ian McPhee Canberra ACT

Auditor-General 24 April 2008
ȱ
ȱ

108
Appendices

109
110
Appendix 1: Agency Response
ȱ
111
ȱ
ȱ
ȱ

112
Appendix 1

113
Appendix 2: Authority for acquisition of data
Provided data
Table A 1 (a)
Data provided to the Tax Office by taxpayers or their tax agents
Data Type / Description Legislation
Part IV - Income Tax Assessment Act 1936 (ITAA 1936) in particular -
Income Tax Return
sec.161, 161A, 162
Schedules (e.g. CGT, Rental) Part IV - ITAA 1936 in particular - sec.161, 161A, 162
With respect to PAYG activities - Section 16-150 - Part 2-5 PAYG

withholding, Schedule 1 Taxation Administration Act 1953.
With respect to GST - GST Returns - A New Tax System (Goods and
Services Tax) Act 1999 - Div 31- see sec.31-15 re: approved form.
Business Activity Statement
With respect to Fringe Benefits Tax - Notification of instalment in approved
form - see sec. 104 Fringe Benefits Tax Assessment Act 1986 (i.e. a
separate return is required for the annual FBT return - instalments required
to be lodged with BAS).
The following are legislative requirements:
x Section 39 of the Excise Act (Application for Licences)
x Section 58 of the Excise Act (Entry for Home Consumption)
x Regulation 52 of the Excise Regs (Application for Remission, Rebate
or Refund)
x Regulation 78A of the Excise Regulations (Conditions Relating to
Payment of Drawback of Duty)
The following are inferred in the legislation as the Collector must make a
decision and it is based on information supplied by the taxpayer:
x Section 61A of the Excise Act (Permission to Remove Goods that are
Excise forms Subject to the CEO's Control)
x Section 61C of the Excise Act (Permission to Deliver Certain Goods
for Home Consumption Without Entry)
The following are administrative requirements that certain information is
supplied to the Tax Office:
x Excise Registration Form. This allows the Tax Office to create an
Excise CAC on the client’s AIS account.
x Consent to Obtain Information Form. This provides permission for the
Tax Office to obtain information on a client or company to complete the
fit & proper persons checks under the Licensing part of the Excise Act
(Sec39A (2)).
The Superannuation Industry (Supervision) Act 1993.
Sec.254(1) Information is to be given to the regulator in an approved form.
Sec.299U(1) provides that the Approved Form may require the TFN of the
Self Managed
fund 'Regulator', which is defined under sec.10 to mean:
Superannuation Funds forms
(c) the Commissioner of Taxation if the provision in which it occurs is, or is
being applied for the purposes of, a provision that is administered by the
Commissioner of Taxation. (Note (a) and (b) not relevant to this definition.

114
Appendix 2
Data Type / Description Legislation

TFN - Sec.202B of the ITAA 1936.
Where a TFN or ABN is quoted to an investment body, a TFN report must
be lodged by the investment body under reg.55 of the Income Tax
Application form for TFN, Regulations 1936.
ABN ABN - Sec.9 of A NEW TAX SYSTEM (AUSTRALIAN BUSINESS
NUMBER) ACT 1999 requires an applicant to apply for registration in the
Australian Business Register. They must use a form approved by the
Registrar of the Australian Business Register.
Source: Tax Office
ȱ
Table A 1 (b)
Supplementary data provided to the Tax Office by taxpayers or their tax
agents
Data Type / Description Associated Schedules / Attachments
Individual tax return H/Individual Baby bonus claim (NAT 6581)
Income tax return (NAT H/W 1371) Capital gains tax (CGT) schedule (NAT 3423)
Produced for use by tax agents. Family tax benefit tax claim (NAT 4117)
Contains tax return for individuals,
supplementary section, business Family tax benefit SHORT tax claim (NAT 4153)
and professional items. Individual PAYG payment summary schedule (NAT 3647)
Request for a determination of the deductible amount of UPP of a
foreign pension or annuity (NAT 16543)
Request for a determination of the deductible amount of UPP of an
Australian pension or annuity (NAT 16544)
Tax return for individuals Baby bonus claim (NAT 6581)
Produced for self-preparers. Business and professional items schedule for individuals (NAT 2816)
Capital gains tax (CGT) schedule (NAT 3423)
Family tax benefit tax claim (NAT 4117)
Family tax benefit SHORT tax claim (NAT 4153)
Individual PAYG payment summary schedule (NAT 3647)
Request for a determination of the deductible amount of UPP of a
foreign pension or annuity (NAT 16543)
Request for a determination of the deductible amount of UPP of an
Schedule of additional information – private health insurance policy
details
Schedule of additional information – item 10, 11, L1, T1 part C, M1,
M2, M2 spouse’s taxable income
Tax return for individuals (supplementary section) (NAT 2679)
Non-lodgment advice
Produced for self-preparers.
Available in TaxPack, Retirees
TaxPack, Short tax return
instructions and loose form.

115
Tax return for retirees Capital gains tax (CGT) schedule (NAT 3423)
Produced for self-preparers. This is Request for a determination of the deductible amount of UPP of a
a shorter version of the tax return foreign pension or annuity (NAT 16543)
and has its own RDCC transaction. Request for a determination of the deductible amount of UPP of an
Schedule of additional information – private health insurance policy
details, item 26 spouse’s taxable income, item 27 spouse’s taxable
income
Tax return for individuals Business and professional items schedule for individuals (NAT 2816)
(supplementary section) Request for a determination of the deductible amount of UPP of an
Produced for self-preparers. Once Australian pension or annuity (NAT 16544)
completed, is attached to the Tax
return for individuals.
Business and professional items Individual PAYG payment summary schedule (NAT 3647)
schedule for individuals Schedule of additional information – item 14
Produced for self-preparers. Once
return for individuals. The tax return
(supplementary section) must also
be completed.
Individual PAYG payment summary
schedule
return for individuals.
Application for refund of franking
credits for individuals
Produced for self-preparers.
Family tax benefit tax claim Schedule of additional information - maintenance income details -
Produced for self-preparers. Once relevant periods
completed, it can be lodged with the Schedule of additional information - dates of periods overseas
Tax return for individuals or Short Schedule of additional information - Spouse number 1 - maintenance
tax return. income details - relevant periods
Schedule of additional information – maintenance income details -
relevant periods - in cases where there had been additional spouses
Schedule of additional information - dependant number 1 - dates of
periods overseas
Schedule of additional information – dates of periods overseas – in
cases where there had been additional dependents
Schedule of additional information – dependants’ circumstances
Schedule of additional information – family profile (all families)
Schedule of additional information – other employment-related
income
Schedule of additional information – return to work (relevant periods)
Family tax benefit short tax claim
completed, it can be lodged with the
Tax return for individuals or Short
tax return.

116
Appendix 2

Baby bonus claim
completed it can be lodged with the
Tax return for individuals or
Application for refund of franking
credits, or on its own.
Trust tax return (NAT 0660) H/Trust Capital gains tax (CGT) schedule (NAT 3423)
income tax return (NAT HW 06060) Schedule 25A (NAT 1125)
Produced for self-preparers and tax Losses schedule (NAT 3425)
agents.
Personal services income schedule (NAT 3421)
Partnership tax return (NAT 0659) Schedule 25A (NAT 1125)
H/Partnership tax return (NAT H/W Personal services income schedule (NAT 3421)
0659)
Produced for self-preparers and tax
agents.
Fund income tax and regulatory Capital gains tax (CGT) schedule (NAT 3423)
return Losses schedule (NAT 3425)
(NAT 0658)
agents.
Company tax return (NAT 0656) Research and development tax concession schedule (NAT 6708)
Produced for self-preparers and tax Losses schedule (NAT 3425)
agents. Capital gains tax (CGT) schedule (NAT 3423)
Capital allowances schedule (NAT 3424)
Consolidated groups losses schedule (NAT 7888)
Personal services income schedule (NAT 3421)
Dividend and interest schedule (NAT 8030)
Life Insurance companies taxation schedule - consolidated groups
(NAT 7334CON)
Life insurance companies taxation schedule (NAT 7334)
Franking account tax return (NAT NA. No associated Scehule/Attachment
1382)
agents.
Thin capitalisation schedule (NAT NA is a schedule attached to company return 2007
6458)
agents.
Strata title body corporate tax return Company tax return (NAT 0656)
(NAT 4125)
agents.
Non-individual PAYG payment
summary schedule (NAT 3422)
agents.

117
Interposed entity election (NAT
2788)
agents.
Family trust election and/or family
trust revocation (NAT 2787)
agents.
Venture Capital Deficit tax return
(NAT 3309)
agents.
Source: Tax Office.

Note: The above tables (Table A1 (a) and A1 (b)) were prepared by the Tax Office at the request of the
ANAO. Whilst the data is a comprehensive list as at February 2008, it can not be relied upon as an
exhaustive list of all categories of data provided to the Tax Office by taxpayers or their tax agents
pursuant to all legislative, regulatory or Tax Office administrative requirements.
Legislated data
Table A 2
Legislated datasets the Tax Office receives regularly, and the legislation
under which the data is provided
Data type/description Legislation
Financial institutions, share registries and other payers of
investment income report AIIR data to the Tax Office in
Annual Investment Income
accordance with reporting obligations under Sections
Reports (AIIR)
202D and 202G of the Income Tax Assessment Act 1936,
and Regulation 56 of the Income Tax Regulations 1936
AUSTRAC reportable transactions The Anti-Money Laundering and Counter-Terrorism
Financing Act 2006 gives the Tax Office the legal right to
access AUSTRAC data. There is a memorandum of
understanding between both agencies to administer
access to data and related data transfers.
Dividend and Interest Statements are reported under
obligations created by Subsection 161A(1) of the Income
Dividend and Interest Statements
Tax Assessment Act 1936, and Sections 388–50 of the
Tax Administration Act 1953
Family Tax Benefit is governed by A New Tax System
(Family Assistance) Act 1999, and A New Tax System
(Family Assistance) (Administration) Act 1999
Family Tax Benefit
There are cross references (and definitions) in the Social
Security Act 1991 and the Social Security (Administration)
Act 1999

118
Appendix 2

Under Section 16–153 of Schedule 1 to the Tax
Administration Act 1953, payers are required to submit an
Foreign Resident Withholdings
annual report to the Tax Office with details of certain
payments made to foreign residents
The tax authorities in various countries supply this data in
Foreign Sourced Income accordance with reporting obligations under existing tax
treaties with those countries
Section 202 of the Income Tax Assessment Act 1936
Inbound Mail Management
(TFN legislation) Income Tax Ruling 36 (updating client
System
records)
Under Section 16–153 of Schedule 1 to the Tax
Administration Act 1953 payers and other organisations
PAYG Payment Summaries
are required to report to the Tax Office details of payment
summaries issued to their payees during the financial year
This data is received from Medicare Australia and
supplied to the Tax Office in accordance with a reporting
Private health insurance data via
obligation contained within Medicare Australia’s governing
Medicare Australia
legislation, the Private Health Insurance Incentives Act
1998
Quarterly TFN Reports (of TFN
withholding tax withheld by Regulation 55(1)
financial institutions)
This reporting provides complete and accurate information
to the Commissioner when eligible termination payments
are paid on or after 1/7/94 (for employers, if eligible
termination payment is less than $5,000, it is not required
to be reported). Information is specified in the regulations
and must be sufficient to enable a final determination to
be made.
Section 140M ITAA 1936.
Reasonable Benefit Limit notices are to be lodged by the
end of the 14th day of the month after the month the
payer makes an eligible termination payment (where the
Reasonable Benefit Limit value is greater than $5,000) or commences to make
payments of a superannuation pension or an immediate
annuity on or after 1/7/94.
Section 140M (3) ITAA 1936.
Payers Of Benefits – Specified Information (Act S 140m)
Regulation 53K
For each of the following provisions of the Act, the payer
mentioned in the provision must give to the Commissioner
a notice containing the information set out in Schedule 2B:
(a) sub-section 140M(1); (b) paragraph 140M(1A)(f); (c)
paragraph 140M(1C)(f).

119
Section 154–55 of Higher Education Support Act 2003
provides that Higher Education Providers are required to
give the Commissioner any information in relation to
Student Financial Supplement
students that the Commissioner needs for administration
Scheme (SFSS data) + HECS
of their debt. Section 1061ZZEV of the Social Security Act
1991 and section 12ZH of the Student Assistance Act
1973 have similar requirements in relation to SFSS debts.
The Superannuation (Unclaimed Money and Lost
Super Fund Lost Members Members) Act 1999 and its Regulations outline
Register responsibilities for data providers and the Tax Office with
respect to the Lost Members Register.
Reporting of Member Contribution Statements is required
by the following legislation:
Superannuation Contributions Tax (Assessment and
Collection) Act 1997 Section 13, from 1 July 1996 to 30
June 2005
Superannuation (Government Co-contributions for Low
Super Fund Member Contribution
Income Earners) Act 2003 Sub-section 26(1), from 1 July
Statements
2006 to 30 June 2008
Superannuation Guarantee (Administration) Act 1992
Section 78, from 1 July 2005 to 30 June 2008
NOTE: From 1 July 2008 the Superannuation Fund
Members Contribution Statements will be covered under
the Tax Administration Act 1953
Super (Constitutionally Protected Funds) A & C Act 1997
Super Member Exit Statements Pt 3, sec 12 (2) & (3) – Superannuation providers to give
statements
The legislation covering TFN declaration reporting is
Section 202C–202CF of the Income Tax Assessment Act
TFN Declarations (received daily)
1936 and for electronic reporting the Electronic
Transactions Act 1999, Section 11.
Centrelink provides the following data to the Tax Office
under cover of its own legislation:
Details of benefits income paid to clients, which the Tax
Office uses to identify any undeclared government
income.
Welfare payments and Centrelink Centrelink client outstanding debts. The Tax Office takes
debtors garnishee action against refund cheques as a means of
recovering amounts outstanding to Centrelink.
Data the Tax Office returns to Centrelink in relation to
these exchanges is provided under the Data Matching
Program (Assistance and Tax) Act 1990, Section 16(4)(e)
of the Income Tax Assessment Act 1936 and A New Tax
System (Family Assistance Administration) Act 1999.
Source: Tax Office

120
Appendix 2
Memorandum of understanding data

Table A 3
Datasets acquired through a memorandum of understanding
Data type/description Memorandum of understanding
Australian Securities and The memorandum of understanding between the Tax
Investments Commission Office and ASIC is to enhance liaison and relationships
between the agencies. The memorandum of
understanding set the information sharing arrangement
between ASIC and the Tax Office to help administer or
enforce the particular laws for which each agency is
responsible.
State Revenue Offices A 2005 memorandum of understanding governs exchange
of confidential information and other aspects of
cooperation between the Tax Office and participating
state and territory revenue offices.
Source: Tax Office
Purchased data
Table A 4
Datasets the Tax Office purchases
Data type Description
The Tax Office purchases electoral roll data on a periodic
Australian Electoral Commission
basis.
The Tax Office purchases Fact Of Death data from the
Fact of Death data State and Territory government Offices of Registrar-
General, on a periodic basis.
ASIC Purchased by Large Business and International to risk
profile taxpayers.
Reed Construction Data The purchased data represents building approval
information, relative to non-individuals, acquired by GST
and Small and Medium Enterprises Business Lines to
support their building and construction audit program. The
data was initially purchased in 2005-06 and the Tax Office
continues to receive updates on a regular basis. GST has
since determined that the data no longer adequately
supports their needs but Small and Medium Enterprises
Business Line continue to find value in the data.
Source: Tax Office

121
Datasets the Tax Office requisitioned on an ad hoc basis
for data matching projects
BetweenȱJanuaryȱ2000ȱandȱJuneȱ2007,ȱtheȱTaxȱOfficeȱgazettedȱ47ȱdataȱmatchingȱ
projects.ȱ
TheȱdataȱusedȱinȱtheseȱprojectsȱmayȱhaveȱbeenȱvoluntarilyȱprovidedȱtoȱtheȱTaxȱ
Office;ȱ orȱ oneȱ orȱ moreȱ ofȱ theȱ followingȱ legalȱ authoritiesȱ wereȱ usedȱ toȱ
compulsorilyȱrequisitionȱtheȱdata:ȱ
x sectionȱ264ȱofȱtheȱIncomeȱTaxȱAssessmentȱActȱ1936;ȱ
x sectionȱ353–10ȱofȱtheȱTaxationȱAdministrationȱActȱ1953;ȱ
x sectionȱ128ȱofȱtheȱFringeȱBenefitsȱTaxȱAssessmentȱActȱ1986;ȱorȱ
x sectionȱ77ȱofȱtheȱSuperannuationȱGuaranteeȱ(Administration)ȱActȱ1992.ȱ
Table A 5
Tax Office’s gazetted data matching projects 2000–07
Gazette
No number Project name Data sources Project description
and date
The Tax Office electronically matched
GN 3, names and addresses from certain sections
1 27 Jan Autosearching AUSTRAC of Tax Office data holdings to reveal
2000 financial transaction information that related
to the Tax Office names and addresses.
names and addresses with certain sections
GN 39, Medical State Medical of Tax Office data holdings to reveal
2
2 Oct 2002 Profession Practitioners Register medical practitioners’ compliance with
lodgement and payment obligations under
taxation law.
S 145, names and addresses with certain sections
Profession/ State Boards for
3 8 May of Tax Office data holdings to identify non
industry Architects
2003 compliance with lodgement and payment
obligations under taxation law.
GN 37, names of people incarcerated in all states
All State Department
Prison of Australia with certain sections of Tax
4 17 Sep of Correctional
population Office data holdings to identify non
2003 Services
compliance with lodgement and payment

122
Appendix 2
Gazette
and date
The Tax Office cross-referenced with its
internal data to identify entities that were
registered for GST, received income and/or
prize money and accounted erroneously in
GN 42, Stakes Payment
relation to their GST or income tax liability;
System of the NSW
5 22 Oct Horse racing entities that were not registered for GST but
Thoroughbred Racing
2003 should be and identified associated
Board
potential GST and income tax liabilities;
and to produce relevant case selection
procedures and implement appropriate
educational campaigns.
GN 42, business names and addresses with certain
Victorian Work Victorian Work Cover sections of Tax Office data holdings to
6 22 Oct Cover Authority identify non compliance with registration,
2003 lodgement and payment obligations under
taxation law.
The Tax Office electronically matched with
GN 43, taxpayers’ income tax return information
State and Territory
and business activity statement database to
7 29 Oct Pubs and clubs Gaming and Liquor
identify entities that are not registered for
2003 Licences Register
GST but should be and identify associated
potential GST liabilities.
GN 44, taxpayers' income tax return information
Dairy Dairy Adjustment
8 5 Nov held on the Tax Office’s tax return database
adjustment Authority
2003 with data regarding payments made under
the Dairy Structural Adjustment Program.
Motor vehicle
registrars throughout
Australia; state and
territory agencies
responsible for The Tax Office cross-referenced with its
surveying commercial internal data to identify entities that were
vessels; state and registered for GST, disposed of capital
GN 48, territory agencies assets and accounted erroneously in
Disposal of responsible for relation to their GST liability; entities that
9 3 Dec asset administering land were not registered for GST but should be
2003 titles, sale of real and identified associated potential GST
property and sale of liabilities; and to produce relevant case
businesses; selection procedures and implement
Intellectual Property appropriate educational campaigns.
Australia; Civil
Aviation Safety
Authority; and Esanda
Finance

123
Gazette
and date
CPA Australia;
National Institute of
Accountants; National
Tax & Accountants The Tax Office electronically matched
S 452, Association; Institute membership information with certain
Accounting of Chartered sections of Tax Office data holdings to
10 4 Dec profession Accountants identify non compliance with registration,
2003 Australia; Association lodgement and payment obligations under
of Taxation and taxation law.
Management
Accountants; Taxation
Institute of Australia
GN 2, names and addresses of barter members
Barter Member with certain sections of Tax Office data
11 14 Jan Barter Exchanges
Industry Group holdings to identify non compliance with
taxation law.
PJ Williams &
Associates; Twin
Plaza Metals;
Universal Coin The Tax Office requested and collected
Company; Dascorp; purchase and sale transaction details,
Johnson Matthey; E & including names and addresses, for the
Gold bullion, R Gould Unit Trust; period 1 July 2000 to 30 June 2003. The
GN 3,
antiques and Anthony Filippini data was electronically matched with
12 21 Jan art dealings Family Trust; Graham certain sections of Tax Office data holdings
2004 Cornall Antiques; to identify non compliance in terms of
Sotheby’s Australia; incorrect or non lodgement and payment of
Christie‘s Australia; taxation obligations; and/or registration
The Antiques Garden obligations under taxation law.
Unit Trust; Scott
Livesey; and Editions
Australia
GN 12, DEST Department of taxpayers' information held on the Tax
13 24 Mar Apprenticeship Education, Science Office's databases with data regarding
2004 Grants and Training payments made under the Commonwealth
New Apprenticeships Incentive Scheme.
The Tax Office matched business names,
addresses, and details pertaining to
GN 17, property title transfers with certain sections
Victorian State Victorian State
14 28 Apr of Tax Office data holdings to identify non
Revenue Office Revenue Office
2004 compliance with registration, lodgement
and payment obligations under taxation
law.
details with certain sections of Tax Office
data holdings to review licensed securities
S 217, Financial
Australian Securities dealers and investment advisers, and their
planner
15 22 Jun and Investment representatives, registered with ASIC to
compliance
2004 Commission determine their level of tax compliance; and
matching
to identify areas of non compliance and
develop strategies to address these areas
and enhance tax system integrity.

124
Appendix 2
Gazette
and date
Motor vehicle
registrars throughout
Australia; state and
territory agencies
responsible for The Tax Office cross-referenced with its
surveying commercial internal data to identify entities that were
vessels; state and registered for GST, disposed of capital
GN 31, territory agencies assets and accounted erroneously in
Extension of
responsible for relation to their GST liability; entities that
16 4 Aug disposal of
administering land were not registered for GST but should be
2004 asset
titles, sale of real and identified associated potential GST
property and sale of liabilities; and to produce relevant case
businesses; financial selection procedures and implement
institutions; appropriate educational campaigns
Intellectual Property
Australia; and Civil
Aviation Safety
Authority
The Tax Office electronically cross matched
GN 46, Pickles Auctions; and matched names, addresses and
Motor vehicle Fowles Auction telephone numbers with certain sections of
17 17 Nov auction house Group; Auto Auction Tax Office data holdings to identify possible
2004 Group non compliance with lodgement and
payment obligations under taxation law.
licence registration formation with certain
sections of Tax Office data holdings to
identify clients with any outstanding tax
GN 12, Building Services returns or activity statements; clients that
18 30 Mar BSA Authority may have incorrectly declared income on a
2005 (Queensland) tax return and that may have incorrectly
declared total supplies on an activity
statement; and clients that were not
meeting other tax obligations (i.e. GST
registration)
The Tax Office cross-referenced with its
Queensland Racing; internal data to identify entities that were
Racing Victoria registered for GST, received income and/or
Limited; Tasmanian prize money and accounted erroneously in
GN 13, Thoroughbred Racing relation to their GST or income tax liability;
19 Horse racing Council; Darwin Turf entities that were not registered for GST but
6 Apr 2005 Club; Thoroughbred should be and identified associated
Racing SA Limited; potential GST and income tax liabilities;
Racing and Wagering and to produce relevant case selection
Western Australia procedures and implement appropriate
educational campaigns.
GN 14, names and addresses of entities within the
real property market with certain sections of
20 13 Apr RPDATA RPDATA Pty Ltd
Tax Office data holdings to identify non

125
Gazette
and date
Desk Top Marketing
System; Australia On
Disk; lnfot Inc.;
GN 16, names and addresses of removalist
Australia Business
Removalist industry members with certain sections of
21 27 Apr Database; and
industry Tax Office data holdings to identify non
2005 Australian state and
compliance with reporting obligations under
territory motor vehicle
taxation law.
(truck) registration
data
The Tax Office electronically cross matched
information provided in applications for
GN 18, Motor vehicle motor vehicle retailer and wholesaler
All state and territory
22 11 May retailing and licenses with certain sections of Tax Office
licensing bodies
2005 wholesaling data to identify possible non compliance
with lodgement and payment obligations
under taxation law.
ACT Dep. of Fair
Trading; NSW Dep. of
Fair Trading; All local
government councils
in NSW; Queensland
Crime and
Misconduct
Commission;
Queensland
Prostitution
Enforcement
Taskforce;
Queensland Dep. of The Tax Office electronically matched
Tourism, Racing and names and addresses of entities registered
GN 20, Fair Trading; as providers of adult services with Tax
23 25 May Adult services Queensland Office of Office data holdings to identify possible non
2005 Fair Trading; SA compliance with registration, lodgement
Office of the Liquor and payment obligations under taxation
and Gaming law.
Commissioner;
Tasmanian Dep. of
Justice; Tasmanian
Dep. of Treasury &
Finance; Victorian
Dep. of Justice;
Victorian Office of
Consumer Affairs; WA
Dep. of Racing,
Gaming and Liquor;
SENSIS (Yellow
Pages); and Telstra

126
Appendix 2
Gazette
and date
NSW Office of State
Revenue; NSW Dep.
of Land Property
Information; Victorian
State Revenue Office;
ACT Planning
Authority; ACT Land
Titles Office; ACT This notice replaced the previously GN 20,
Revenue Office; NT 25 May 2005 and S 87, 30 May 2005 (not
Treasury; Queensland mentioned in this appendix) regarding the
Office of State same data matching project.
S 90, Revenue;
31 May Capital Gains Queensland Dep. of The Tax Office electronically matched
24 business names, addresses, and details
2005 Tax Natural Resources
and Mines; pertaining to property title transfers with
Tasmanian Dep. of certain sections of Tax Office data holdings
Primary Industries, to identify non compliance with CGT,
Water and income tax and GST obligations under
Environment; taxation law.
Tasmanian Dep. of
Treasury and
Finance; SA Revenue
Office; SA Land
Services Group; and
WA Office of State
Revenue
Workcover
25 27 Jul Workcover SA Corporation South
identify non compliance with registration,
2005 Australia
taxation law.
PMI Mortgage
Insurance; GE The Tax Office electronically matched
Mortgage Insurance; names and addresses of entities who have
GN 42, St George Bank; taken out insurance on low doc loans with
26 26 Oct Low Doc Loans Australia and New certain sections of Tax Office data holdings
2005 Zealand Banking to identify non compliance with lodgement
Group; Westpac and payment obligations under taxation
Banking; and law.
Suncorp–Metway
Workcover Workcover New sections of Tax Office data holdings to
27 2 Nov NSW South Wales identify non compliance with registration,
taxation law.
Workcover sections of Tax Office data holdings to
28 30 Nov Workcover Qld
Queensland identify non compliance with registration,
taxation law.

127
Gazette
and date
details of licensed builders, electricians,
GN 48, Office of Consumer plumbers and gas fitters with certain
Trades
29 7 Dec and Business Affairs sections of Tax Office data holdings to
Compliance
2005 – South Australia identify non compliance with registration,
taxation law.
names, addresses, and telephone numbers
GN 49, Pickles Auctions;
and other information with certain sections
Motor Vehicle Fowles Auction
30 14 Dec of Tax Office data holdings to identify
Auction House Group; and Auto
2005 possible non compliance with lodgement
Auction Group
law.
S 232, names and addresses of entities within the
real property market with certain sections of
31 16 Dec RPDATA RPDATA Pty Ltd
Tax Office data holdings to identify non
GN 1, Legal Attorneys General
names and addresses with certain sections
profession and state and territory
32 11 Jan of Tax Office data holdings to reveal non
(including Legal Practitioners
judiciary) Registers
NSW Roads and
Traffic Authority;
Queensland
Transport; Vic Roads;
Tasmanian Dep. of The Tax Office electronically matched
Infrastructure, Energy details of individuals or entities that had
GN 15, and Resources; purchased or acquired a motor vehicle
33 19 Apr Luxury vehicle Transport SA; WA valued at $70,000 or higher with certain
2006 Dep. for Planning and sections of Tax Office data holdings to
Infrastructure; NT identify non compliance with lodgement and
Dep. of Planning and payment obligations under taxation law.
Infrastructure
(Transport Division);
and ACT Road
Transport Authority
Australian Maritime
Safety Authority;
NSW Maritime
Authority; Maritime
Safety Queensland;
Marine Safety
GN 25, details of individuals or entities who
Victoria; Marine and
registered a marine vessel with certain
34 28 Jun Marine vessel Safety Tasmania; SA
2006 Dep. for Transport,
identify non compliance with lodgement and
Energy and
payment obligations under taxation laws.
Infrastructure; WA
Dep. for Planning and
Infrastructure; and NT
Dep. of Planning and
Infrastructure

128
Appendix 2
Gazette
and date
Australian Fisheries
and Management
Authority; Australian
Maritime Safety
Authority; WA Dep. of
Fisheries; WA Office
of State Revenue;
Transport WA;
Queensland Dep. of
Fisheries;
Queensland Office of
State Revenue;
Queensland Dep. of
Transport; Tasmanian
Dep. of Primary
Industries, Water and
Environment;
information about commercial fishing
Tasmanian State
GN 30, licence holders, commercial boat licence
Revenue Office;
Fishing holders and registrations, and transfers of
35 2 Aug Tasmanian Marine
industry fishing licences and unit entitlements with
2006 and Safety; NSW
Tax Office data to identify non compliance
Fisheries; NSW Office
with lodgement and payment obligations
of State Revenue;
under taxation law.
NSW Maritime
Authority; Victorian
Dep. of Primary
Industries; Marine
Safety Victoria; SA
Dep. of Primary
Industries and
Resources; Revenue
SA; Transport SA; NT
Dep. of Primary
Industry and
Fisheries; NT
Territory Revenue
Management; and NT
Dep. of Transport
(Marine Branch)
Civil Aviation Safety
details of individuals or entities that had
GN 33, Authority;
purchased or acquired an aircraft with
Recreational Aviation
36 23 Aug Aircraft certain sections of Tax Office data holdings
Australia; and
2006 to identify non compliance with lodgement
Australian Sports
Rotorcraft Association
law.

129
Gazette
and date
NSW Office of State
Revenue; NSW Dep.
of Lands; Victorian
State Revenue Office;
ACT Planning and
Land Authority; ACT
Land Titles Office; NT
Treasury; NT Dep. of This notice replaced the S 90, 31 May 2005
Planning and regarding the capital gains tax data
Infrastructure; NT matching project.
Land Titles Office;
GN 37, Queensland Office of The Tax Office electronically matched
37 Real property State Revenue; identity and transaction details pertaining to
20 Sep
Queensland Dep. of property title transfers with certain Tax
2006
Natural Resources, Office data holdings to identify non
Mines and Water; compliance with capital gains tax, income
Tasmania State tax and goods and services tax obligations
Revenue Office; under taxation law.
Tasmania Dep. of
Primary Industries
and Water; SA
Revenue Office; SA
Land Services Group;
and WA Office of
State Revenue
Queensland The Tax Office electronically matched
Residential Tenancies names and address details pertaining to
GN 37, Residential Authority; NSW Office residential tenancy agreements with certain
38 20 Sep tenancies of Fair Trading; and Tax Office data holdings to identify non
2006 authorities Victorian Residential compliance with rental income, capital
Tenancies Bond gains tax and other income tax obligations
Authority. under taxation law.
details pertaining to property title transfers
GN 37, by non-residents, their names, and
Foreign Foreign Investment
39 20 Sep addresses with certain Tax Office data
resident Review Board
2006 holdings to identify non compliance with
taxation law.
Link Market Services The Tax Office electronically matched
Limited; identity and transaction details pertaining to
GN 37, Computershare securities with certain Tax Office data
40 20 Sep Shares data Limited; Australian holdings to identify non compliance with
2006 Stock Exchange capital gains tax, income tax and goods
Limited; and and services tax obligations under taxation
Registries Limited law.

130
Appendix 2
Gazette
and date
This notice was supplementary to GN 42,
22 Oct 2003 regarding the horse racing
data matching project.
Stakes Payment The Tax Office electronically matched
GN 37, System of the New details pertaining to horse trainers, owners,
41 Horse industry South Wales jockeys, stable-hands, and track-riders,
20 Sep
Thoroughbred Racing including records relating to individuals,
2006
Board partnerships, companies, and trusts; with
certain sections of Tax Office data holdings
to identify non compliance with lodgement
law.
Workcover sections of Tax Office data holdings to
42 8 Nov Workcover Tasmania
Tasmania identify non compliance with registration,
taxation law.
Workcover Workcover Western sections of Tax Office data holdings to
43 8 Nov West Australia Australia identify non compliance with registration,
taxation law.
GN 47, Victorian Taxi names and addresses of entities within the
Directorate and taxi industry with certain sections of Tax
44 29 Nov Taxi industry
Queensland Office data holdings to identify non
2006 Transport compliance with lodgement and payment
Westfield
Management;
Colonial First State
Property The Tax Office electronically matched
Management; Lend names and addresses of entities that
GN 14, Lease Property operate as shop owners within major
Shopping
45 13 Dec Management (Aust); shopping centres with certain sections of
centre retailers
2006 Stockland Property Tax Office data holdings to identify non
Management; AMP compliance with lodgement and payment
Capital Investors; obligations under taxation law.
Centro Properties
Group; and General
Property Trust
46 24 Jan NT WorkSafe NT WorkSafe
identify non compliance with registration,
taxation law.

131
Gazette
and date
This notice referred to development of the
National Identity Security Strategy project
announced by the Australian Government
Dep. of Immigration in April 2005 and was later endorsed by
GN 18, and Citizenship; COAG in September 2005.
Integrity of Centrelink; Medicare This pilot is being managed by the
9 May Australia; and NSW
47 Identity Data Attorney-General’s Department in
2007 Registrar of Births,
Pilot partnership with the Tax Office. It will test
Deaths and Marriages the integrity of a sample of 25,000 records
of the Tax Office’s tax file number
database. It includes cross-agency data
matching against the identity registers of a
range of government agencies.
Source: ANAO analysis of information in the Commonwealth Gazette Notices

132
Appendix 3: Tax Office’s data mining, modelling,
mapping and analytics projects
1. Theȱ Taxȱ Officeȱ expectsȱ itsȱ analyticsȱ projectsȱ toȱ transformȱ dataȱ andȱ
informationȱintoȱknowledgeȱtoȱsupportȱdecisionȬmakingȱactivities.ȱTheȱ
TaxȱOfficeȱexpectsȱthatȱtheȱprojectsȱwillȱenableȱapplicationȱofȱconsistentȱ
andȱrigorousȱmethodsȱtoȱproduceȱprofiles,ȱreportsȱandȱmodelsȱthatȱwillȱ
helpȱtheȱTaxȱOfficeȱbetterȱunderstandȱtaxpayerȱbehaviours,ȱandȱpredictȱ
futureȱ behaviours.ȱ Theȱ Taxȱ Officeȱ expectsȱ theseȱ projectsȱ willȱ leadȱ toȱ aȱ
greaterȱunderstandingȱofȱtaxpayerȱgroupsȱandȱindividualsȱsoȱtheyȱcanȱ
beȱ treatedȱ inȱ aȱ mannerȱ thatȱ suitsȱ theirȱ complianceȱ behaviour.ȱ Ifȱ theseȱ
objectivesȱ areȱ achievedȱ theȱ analyticsȱ projectsȱ shouldȱ enableȱ theȱ Taxȱ
Officeȱ toȱ interactȱ withȱ theȱ communityȱ andȱ taxpayersȱ inȱ waysȱ thatȱ areȱ
lessȱintrusiveȱandȱmoreȱappropriate,ȱefficient,ȱandȱeffective.ȱ
2. TheȱTaxȱOfficeȱhasȱthreeȱdataȱanalyticsȱandȱminingȱgroupsȱinȱtheȱChiefȱ
Knowledgeȱ Officeȱ businessȱ lineȱ workingȱ onȱ aȱ wideȱ rangeȱ ofȱ projects.ȱ
Theseȱincludeȱriskȱanalysesȱandȱpredictiveȱmodellingȱofȱtaxȱcomplianceȱ
behaviourȱinȱrelationȱtoȱcomplianceȱrisksȱinȱtheȱareasȱofȱtaxȱagents,ȱhighȱ
riskȱ refunds,ȱ debtȱ andȱ lodgement,ȱoperationȱ Wickenby,ȱ aggressiveȱtaxȱ
planning,ȱ taxȱ havens,ȱ underȱ reportingȱ ofȱ foreignȱ sourcedȱ income,ȱ andȱ
nonȬcomplianceȱ withȱ employerȱ obligations.90 ȱ Theȱ threeȱ groupsȱ liaiseȱ
withȱbusinessȱlinesȱtoȱdevelopȱtaxpayerȱprofilesȱandȱpredictiveȱmodels.ȱȱ
3. Thisȱ workȱ hasȱ enabledȱ theȱ Taxȱ Officeȱ toȱ beȱ moreȱ targetedȱ andȱ moreȱ
efficientȱ inȱ relationȱ toȱ lodgementȱ enforcement;ȱ toȱ haveȱ automatedȱ
actionȱ aboutȱ veryȱ lowȱ riskȱ refunds;ȱ toȱ useȱ GSTȱ andȱ cashȱ economyȱ
modelsȱtoȱbeȱmoreȱtargetedȱandȱmoreȱefficientȱinȱrelationȱtoȱauditȱandȱ
enforcement;ȱ andȱ toȱ betterȱ manageȱ superannuationȱ guaranteeȱ
obligationȱcaseȱwork.ȱ
90
The Australian Government established Project Wickenby after information became available that
international tax scams were operating in Australia and some Australians had engaged in them in a
deliberate effort to take income outside the operation of Australia’s tax laws. In 2006 the Australian
Government provided $305 million for the project, which brings together the Australian Tax Office as the
lead agency, the Australian Crime Commission, the Australian Federal Police, the Australian Securities
and Investments Commission and the Commonwealth Director of Public Prosecutions. Statement by the
Treasurer of the Commonwealth of Australia Thursday, 20 July 2006.
<http://www.treasurer.gov.au/tsr/content/transcripts/2006/108.asp> .

133
Table A 6
Analytics projects 2005 to 2007
No. Project/Model Objective
To bring a consistent modelling approach based
on the framework of predicting the change in tax
1 All Obligations – Whole-of-client that would result from a review, and generating a
client risk score for specific areas of the Client
Risk Score matrix.
To help automate the processes used to identify
2 Registration – Identity crime people who have either created or taken over
another person’s identity.
Four phases are to be delivered over 3½ years
(from 2005 to 2008), relating to outstanding
lodgement obligations.
Phase 1 – Predict risk to revenue.
Phase 2 – Predict risk to revenue of all
Lodgement – Identification of client outstanding lodgements.
3
risk Phase 3 – Stage 1. Predict propensity to lodge
and risk to revenue. Stage 2. Predict risk to
reputation. Stage 3. Predict risk of missing
information.
Phase 4 – Risk score accumulated at associated
entities/groups of clients.
Determine the effectiveness of existing treatment
strategies across all clients in the known non
Lodgement – Strategy evaluation lodging and late lodging population.
4 and improvement; and propensity to Determine appropriate treatment strategy for all
lodge clients.
Estimate the probability that a client will lodge
within a certain time period of the due date.
Measure effectiveness of late and non lodged
penalty impositions, and failure to lodge warnings
for non lodgement and late lodgement.
Determine imposition gaps.
Identify categories of clients where penalty
5 Lodgement – Failure to lodge imposition for non lodgement is likely to result in
lodgement and improvement to future lodgement
compliance behaviour.
Profile clients according to their propensity to
lodge (i.e. identify common characteristics of
those likely/not likely to respond to failure to lodge
penalty or warnings).
Ability to differentiate clients based on their risk of
6 Lodgement – Shift to instalments non compliance if they take up an instalment
option.
Improve strike rate and return-on-investment for
7 Reporting – GST field
compliance cases generated for GST field.

134
Appendix 3

Identify entities effecting gross tax in micro clients
8 Reporting – Tax agent micro clients other than taxable income and related with a view
to predicting gross tax.
To provide a list of clients with low or no ‘gross
9 Reporting – Low risk gross interest
interest’ risk for earlier closure.
Reporting – Low risk ‘salary and To provide a list of clients with low or no risk in
10
wages’ salary or wages for earlier closure.
11 Reporting – Risk scores To provide a risk score for each individual client.
To identify promoters of tax avoidance and tax
12 Reporting – Promoters
evasion schemes.
Build an analytic model to risk-rate employers in
13 Reporting – Super guarantee regard to their superannuation guarantee
obligations and assist with case selection.
The developed analytic model identifies high and
Reporting – Super guarantee low risk employee notification cases more
14
employee notification accurately than the existing activity rating rules
and increases detection accuracy.
Review current processing of pre-issue high risk
Reporting – High risk refunds refund cases to improve strike rate and increase
15
(income tax) the return-on-investment by reducing the overall
number of non-productive cases being reviewed.
Reporting – Small and medium To identify potential high-risk tax agents with
16
enterprise tax agents and clients small and medium enterprise clients.
Reporting – Micro tax agents and To identify potential high-risk tax agents who have
17
clients substantial micro business client components.
Reporting – Small and medium To identify potential high-risk small and medium
18
enterprise clients enterprise clients.
To detect previously unknown onshore
(Australian) entities linked to known promoters
operating out of a specified tax haven or other tax
haven countries.
To analyse the tax behaviour of the promoters
19 Reporting – Operation Wickenby and identify relationships, patterns and trends.
To analyse Operation Wickenby data to identify
patterns and trends indicative of emerging risks
with promoter schemes.
Develop classification and prediction models that
help detect promoters and associated entities.
20 Reporting – Micro clients To identify potential high-risk micro clients.
Case selection for non-compliant clients who
21 Reporting – Employer obligation
under-withhold income tax withholding.

135
To identify individuals who have high spending
Reporting – Conspicuous patterns that are inconsistent with their incomes
22
consumption clients and who are using tax havens, schemes and/or
the cash economy to disguise their income.
Reporting – Cash economy pubs and
To improve the strike rate of cases reviewed as
23 clubs; restaurants and cafes; and
high risk in unreported income.
construction
To improve the strike rate of cases reviewed as
24 Reporting – General cash economy
high risk in unreported income.
To review current processing of identifying pre-
issue high risk refund cases.
Reporting – High risk To improve targeting of high risk cases to avoid
25
refunds/incorrect credits (GST) unnecessary delays in refunds and to increase
the return-on-investment by reducing the overall
number of non-productive cases being reviewed.
Model the payment risk of legal and complex case
Accounting – Legal and complex
26 management debt cases for case selection
cases
prioritisation.
A review of the effectiveness of the legal and
27 Accounting – Propensity to pay
complex risk model.
To demonstrate the goodness of fit of the risk
model to the large income tax withholding client
28 Accounting – Income tax withholding population.
To provide client segments based on payday
periodicity or aperiodicity.
To identify taxpayers with low capacity to pay due
30 Accounting – Capacity to pay
to financial distress or insolvency.
Improve efficiency of revenue collection and debt
Accounting – Propensity to pay
31 case finalisation by choosing treatments based on
(income tax and GST)
client propensity to pay.
To provide a high level description of the purpose
32 Accounting – C2P & P2P (Version 2) and intent for the design of the Capacity to Pay
(C2P) and Propensity to Pay (P2P) risk models.
Model the payment risk of debt cases for
selection for referrer project. (This is a pilot project
33 Account – Referrer project
to understand how third parties could collect debt
for the Tax Office.)
Source: ANAO analysis of Tax Office’s Analytics Project Fact Sheets.

136
Glossary
Advancedȱ Theȱ applicationȱ ofȱ theȱ analyticsȱ disciplineȱ usingȱ
Analyticsȱ sophisticatedȱ technologyȱ toȱ deliverȱ analyticsȱ modelsȱ fromȱ
veryȱlargeȱcollectionsȱofȱdata.ȱTheseȱmodelsȱuseȱdataȱminingȱ
techniquesȱtoȱdiscoverȱrelationshipsȱfromȱtheȱdataȱandȱinferȱ
futureȱ behaviourȱ orȱ events.ȱ Theȱ modelsȱ canȱ beȱ categorisedȱ
asȱdescriptive,ȱpredictiveȱorȱdecisionȬoriented.ȱSuchȱmodelsȱ
areȱ considerablyȱ moreȱ complexȱ andȱ moreȱ dynamicȱ thanȱ
expertȱbusinessȱrulesȱenginesȱandȱgenerallyȱidentifyȱaȱfinerȱ
levelȱ ofȱ detailȱ andȱ understandingȱ ofȱ theȱ populationsȱ inȱ theȱ
data.ȱ Advancedȱ analyticsȱ typicallyȱ requiresȱ considerablyȱ
moreȱ computationalȱ processingȱ ofȱ theȱ dataȱ dueȱ toȱ theȱ
sophisticatedȱalgorithmsȱtheyȱutilise.ȱ
Ȭȱ Draftȱ Commonȱ Businessȱ Languageȱ term,ȱ Authorisedȱ byȱ theȱ
CKO,ȱSeptemberȱ2007ȱ
Analyticsȱ Aȱdisciplineȱthatȱidentifiesȱpatterns,ȱrelationshipsȱandȱtrendsȱ
fromȱ data,ȱ usingȱ aȱ varietyȱ ofȱ mathematicallyȱ basedȱ
technologiesȱ principallyȱ drawnȱ fromȱ statisticsȱ andȱ dataȱ
mining.ȱMostȱbroadly,ȱanalyticsȱcoversȱwhatȱmightȱbeȱcalledȱ
basicȱanalytics,ȱincludingȱdataȱexplorationȱandȱaggregation,ȱ
andȱadvancedȱanalytics,ȱwhichȱusesȱdataȱminingȱtechnologyȱ
forȱdiscoveryȱandȱmodelȱbuildingȱpurposes.ȱUsingȱstatisticalȱ
andȱ dataȱ miningȱ technologies,ȱ significantlyȱ moreȱ complexȱ
relationshipsȱ withinȱ andȱ betweenȱ entitiesȱ (e.g.ȱ taxpayers)ȱ
canȱ beȱ discoveredȱ andȱ modelled,ȱ basedȱ onȱ analysesȱ overȱ
veryȱlargeȱpopulationsȱofȱcollectedȱdata.ȱȱ
Analyticsȱ isȱassistedȱbyȱ theȱuseȱofȱgoodȱ dataȱmatchingȱandȱ
dataȱ linkingȱ techniquesȱ whichȱ improveȱ theȱ qualityȱ andȱ
valueȱ ofȱ dataȱ inputsȱ availableȱ toȱ aȱ dataȱ miner.ȱ Conversely,ȱ
analyticsȱ canȱ alsoȱ provideȱ technologyȱ toȱ assistȱ dataȱ
matchingȱandȱdataȱlinkingȱactivities.ȱȱ

137
BasicȱAnalyticsȱ Theȱ applicationȱ ofȱ theȱ analyticsȱ disciplineȱ usingȱ
fundamentalȱ statisticalȱ methodsȱ andȱ onlineȱ analyticalȱ
processingȱ technology.ȱ Thisȱ includesȱ dataȱ explorationȱ andȱ
aggregation,ȱ includingȱ cubeȱ analysis,ȱ asȱ wellȱ asȱ statisticalȱ
profilingȱandȱanalysis.ȱ
Analyticsȱ(statisticalȱandȱdataȱminingȱtechnology)ȱisȱusedȱinȱ
manyȱ areas,ȱ includingȱ dataȱ matchingȱ (matchingȱ dataȱ
relatingȱtoȱtheȱsameȱentity)ȱandȱdataȱlinkingȱ(linkingȱentitiesȱ
throughȱcommonȱcharacteristics).ȱ
Channelsȱ Reportingȱ channelsȱ forȱ legislatedȱ dataȱ areȱ detailedȱ withinȱ

variousȱreportingȱspecificationsȱissuedȱbyȱtheȱTaxȱOffice.ȱȱ
TheȱchannelsȱavailableȱtoȱthirdȬpartyȱdataȱprovidersȱare:ȱ
x Paperȱbasedȱreporting;ȱ
x Magneticȱmediaȱ(Computerȱfloppyȱdiskȱorȱmagneticȱ
cartridgeȱ tape).ȱ Theȱ Taxȱ Officeȇsȱ Magneticȱ
Informationȱ Processingȱ Servicesȱ sectionȱ decidedȱ toȱ
withdrawȱ theȱ optionȱ ofȱ reportingȱ onȱ magneticȱ
cartridgeȱ tapeȱ fromȱ Juneȱ 2006ȱ asȱ aȱ resultȱ ofȱ theȱ
industryȱ wideȱ phasingȱ outȱ ofȱ thisȱ medium,ȱ butȱ hasȱ
extendedȱ itsȱ useȱ onȱ aȱ ȇcaseȱ byȱ caseȇȱ basisȱ toȱ assistȱ
someȱ largerȱ reportersȱ inȱ theirȱ transitionȱ toȱ otherȱ
reportingȱchannels;ȱ
x Opticalȱmediaȱ(CDȱorȱDVD);ȱandȱ
x Electronicȱ transmission,ȱspecificallyȱ throughȱ theȱTaxȱ
Officeȇsȱ Electronicȱ Commerceȱ Interfaceȱ (ECI)ȱ
application.ȱ
ȬȱTaxȱOfficeȱ
Confidenceȱ Aȱ measureȱ ofȱ matchȱ thatȱ indicatesȱ theȱ qualityȱ ofȱ theȱ
levelsȱ matchingȱ outcomeȱ andȱ ofȱ theȱ likelihoodȱ thatȱ mismatchȱ hasȱ
occurred.ȱ
ȬȱTaxȱOfficeȱ–ȱAnalysisȱofȱIdentityȱMatchingȱofȱAUSTRACȱDataȱ

138
Dataȱlinkingȱ Theȱlinkingȱofȱdataȱentitiesȱthroughȱcommonȱcharacteristics,ȱ
e.g.ȱlinkingȱaȱcorporateȱgroupȱbasedȱonȱaȱcommonȱownerȱorȱ
linkingȱ transactionsȱ andȱ eventsȱ overȱ timeȱ toȱ aȱ commonȱ
intent.ȱ
Dataȱmappingȱ Identifyingȱtheȱlinksȱandȱassociationsȱbetweenȱentitiesȱ
ȱ Ȭȱ Derivedȱ fromȱ trainingȱ materialȱ inȱ theȱ Officeȱ ofȱ theȱ Chiefȱ
KnowledgeȱOfficerȱ
Dataȱmatchingȱ Theȱ processȱ ofȱ conductingȱ checksȱ ofȱ informationȱ byȱ

matchingȱ dataȱ heldȱ byȱ theȱ Taxȱ Officeȱ withȱ dataȱ obtainedȱ
fromȱotherȱsources.ȱ
ȬȱTaxȱOfficeȱ–ȱCommonȱBusinessȱLanguageȱ
DataȱMatchingȱisȱtheȱacquisitionȱofȱexternalȱdataȱusedȱbyȱtheȱ
Taxȱ Officeȱ forȱ aȱ varietyȱ ofȱ differentȱ purposesȱ suchȱ asȱ
detectionȱofȱunȬdisclosedȱincome,ȱnonȬlodgementȱofȱreturnsȱ
andȱactivityȱstatements,ȱandȱentitiesȱoutsideȱtheȱtaxȱsystem.ȱȱ
ȬȱTaxȱOfficeȱ–ȱExternalȱDataȱMatchingȱPSȱCMȱ2004/17ȱ
Theȱ largeȱ scaleȱ comparisonȱ ofȱ recordsȱ orȱ filesȱ ofȱ personalȱ
informationȱ collectedȱ orȱ heldȱ forȱ differentȱ purposes,ȱ withȱ aȱ
viewȱtoȱidentifyingȱmattersȱofȱinterest.ȱ
Ȭȱ Privacyȱ Commissioner,ȱ Theȱ useȱ ofȱ dataȱ matchingȱ inȱ
Commonwealthȱadministrationȱ–ȱGuidelinesȱ
DataȬmatchingȱ involvesȱ bringingȱ togetherȱ andȱ comparingȱ
dataȱ (includingȱ personalȱ information)ȱ fromȱ differentȱ
sources.ȱ
ȬȱAGIMOȱ–ȱFutureȱChallengesȱforȱEȬgovernmentȱ
Atȱ itsȱ mostȱ fundamentalȱ level,ȱ dataȱ matchingȱ isȱ theȱ linkingȱ
ofȱdatasetsȱandȱcomparisonȱofȱcorrespondingȱdata.ȱ
ȬȱANAOȱThisȱReportȱ

139
Dataȱminingȱ Dataȱ miningȱ transformsȱ rawȱ dataȱ intoȱ higherȬlevelȱ
constructs,ȱ suchȱ asȱ predictiveȱ models,ȱ explanatoryȱ models,ȱ
filtersȱorȱsummaries,ȱbyȱusingȱalgorithmsȱfromȱfieldsȱsuchȱasȱ
artificialȱ intelligenceȱ andȱ statistics.ȱ Techniquesȱ usedȱ canȱ
rangeȱfromȱveryȱsimpleȱmodels,ȱsuchȱasȱarithmeticȱaverages,ȱ
thoseȱ ofȱ intermediateȱ complexity,ȱ forȱ example,ȱ linearȱ
regression,ȱ clustering,ȱ decisionȱ trees,ȱ caseȬbasedȱ reasoningȱ
andȱ kȬnearestȱ neighbour,ȱ toȱ veryȱ complicatedȱ modelsȱ
includingȱneuralȱnetworksȱandȱBayesianȱnetworks.ȱȱ
ȬȱTaxȱOfficeȱ–ȱFinalȱReviewȱofȱAnalyticsȱProject1.pdfȱ
Dataȱmodellingȱ Dataȱmodelsȱareȱusedȱprimarilyȱtoȱrepresentȱandȱdocumentȱ
structuredȱ data,ȱ i.e.ȱ dataȱ thatȱ mayȱ beȱ storedȱ inȱ aȱ database.ȱ
ȱ
Dataȱ modellingȱ usesȱ ‘Entityȱ Relationship’ȱ modellingȱ
techniquesȱ asȱ aȱ widelyȱ usedȱ diagrammingȱ conventionȱ toȱ
documentȱdataȱrequirementsȱandȱrelationshipsȱsoȱasȱtoȱmeetȱ
businessȱrequirements.ȱ
Dependingȱ onȱ theȱ levelȱ ofȱ abstraction,ȱ dataȱ modelsȱ areȱ
categorisedȱ asȱ contextual,ȱ conceptual,ȱ logicalȱ orȱ physicalȱ
models.ȱ
ȬȱDataȱModellingȱGuide,ȱTaxȱOffice,ȱVersionȱ0.1,ȱSeptemberȱ2005ȱ

140
Dataȱqualityȱ Qualityȱ assessesȱ whetherȱ informationȱ isȱ ‘fitȱ forȱ purpose’.ȱ
Purposeȱisȱaȱstatementȱofȱintentȱandȱshouldȱbeȱthoughtȱofȱasȱ
ȱ
inclusiveȱ ofȱ allȱ intendedȱ businessȱ purposesȱ throughoutȱ theȱ
Informationȱ Lifecycle.ȱ Inȱ allȱ qualityȱ systems,ȱ purposeȱ andȱ
requirementsȱ areȱ determinedȱ largelyȱ byȱ theȱ
customer/stakeholder.ȱThisȱviewȱthereforeȱneedsȱtoȱbeȱbuiltȱ
intoȱanyȱassessmentȱofȱdataȱquality.ȱ
TheȱaspectsȱofȱqualityȱofȱinterestȱtoȱtheȱTaxȱOfficeȱare:ȱ
•ȱ accuracy;ȱ
•ȱ completeness;ȱandȱ
•ȱ timeliness.ȱ
Otherȱ qualityȱ aspectsȱ mayȱ beȱ consideredȱ asȱ partȱ ofȱ
particularȱprojectȱinitiatives,ȱincluding:ȱ
•ȱ relevance;ȱ
•ȱ accessibility;ȱ
•ȱ interpretability;ȱandȱ
•ȱ coherence.ȱ
Ȭȱ Dataȱ andȱ Informationȱ Standards,ȱ Versionȱ 1.4,ȱ Taxȱ Office,ȱ Juneȱ
2006ȱ
eȬTaxȱ TheȱTaxȱOfficeȇsȱfreeȱtaxȱreturnȱpreparationȱsoftware.ȱeȬTaxȱ
letsȱ individualsȱ prepareȱ andȱ lodgeȱ onlineȱ individualȱ taxȱ
returns,ȱ babyȱ bonusȱ claimsȱ andȱ 30ȱ perȱ centȱ childȱ careȱ taxȱ
rebateȱtransferȱadvice.ȱ
Expertȱ Rulesȱ Rulesȱ enginesȱ utiliseȱ expertȱ businessȱ rulesȱ toȱ filterȱ andȱ
Enginesȱ identifyȱ taxpayerȱ entitiesȱ whichȱ exhibitȱ knownȱ
characteristicsȱ ofȱ nonȬcompliantȱ behaviour.ȱ Theseȱ rulesȱ areȱ
basedȱonȱrelationships,ȱeventsȱandȱattributesȱthatȱhaveȱbeenȱ
identifiedȱ throughȱ variousȱ sourcesȱ includingȱ statisticalȱ
analysis,ȱdataȱminingȱandȱhistoricalȱexperience.ȱ

141
Identityȱ Identityȱ matchingȱ attemptsȱ toȱ attachȱ ABN/TFNȱ detailsȱ byȱ
matchingȱ matchingȱname,ȱaddressȱandȱotherȱinformationȱcontainedȱinȱ
theȱexternalȱdataȱtoȱTaxȱOfficeȱregistrationȱinformation.ȱ
ȬȱTaxȱOfficeȱ–ȱExternalȱDataȱMatchingȱPSȱCMȱ2004/17ȱ
LegislatedȱDataȱ DatasetsȱthirdȱpartiesȱprovideȱtoȱtheȱTaxȱOffice,ȱasȱaȱresultȱofȱ
ȱ specificȱ legislatedȱ requirementsȱ (e.g.ȱ Annualȱ Investmentȱ
Incomeȱ Reportsȱ providedȱ byȱ financialȱ institutions).ȱ
Legislatedȱ dataȱ setsȱ coverȱ majorȱ incomeȱ streamsȱ suchȱ asȱ
salaryȱ andȱ wagesȱ andȱ interestȱ andȱ dividends,ȱ butȱ doȱ notȱ
coverȱotherȱ incomeȱ streamsȱsuchȱasȱcapitalȱ gains,ȱ netȱ rents,ȱ
andȱincomeȱfromȱselfȱemployment.ȱ
Negativeȱsearchȱ Theȱabilityȱtoȱmatchȱandȱreportȱaȱ‘NoȱMatch’ȱasȱsuccessȱ(thatȱ
capabilityȱ is,ȱtheȱentityȱdoesȱnotȱexistȱinȱtheȱdataȱbeingȱsearched).ȱ
Ȭȱ Taxȱ Officeȱ –ȱ Requestȱ forȱ Tenderȱ Numberȱ 06.389ȱ Identityȱ
MatchingȱSolutionȱȱ
PreȬfillingȱ Provisionȱ ofȱ informationȱ theȱ Taxȱ Officeȱ currentlyȱ usesȱ forȱ
matchingȱ purposes,ȱ directlyȱ intoȱ anȱ individual’sȱ electronicȱ
taxȱ preparationȱ orȱ recordȱ keepingȱ tool.ȱ Itȱ isȱ intendedȱ toȱ
assistȱ thoseȱ doingȱ theȱ rightȱ thingȱ toȱ complyȱ withȱ theirȱ taxȱ
obligations.ȱ
ȬȱTaxȱOfficeȱ–ȱPreȬfillingȱIntentȱStatementȱ
ProvidedȱDataȱ Datasetsȱ aȱ Governmentȱ Agencyȱ providesȱ toȱ theȱ Taxȱ Office,ȱ

ȱ underȱaȱmemorandumȱofȱunderstandingȱ(e.g.ȱStateȱRevenueȱ
Offices).ȱ
Requisitionedȱ DatasetsȱtheȱTaxȱOfficeȱrequisitions,ȱonȱaȱnonȬroutineȱbasis,ȱ
Dataȱ forȱ dataȱ matchingȱ projectsȱ (e.g.ȱ dataȱ isȱ requisitionedȱ fromȱ
ȱ sellersȱofȱluxuryȱvehiclesȱtoȱaddressȱundeclaredȱincomeȱandȱ
otherȱ taxȱ risks).ȱ Theȱ Commissionerȱ ofȱ Taxation’sȱ legislatedȱ
accessȱ andȱ informationȱ gatheringȱ powersȱ provideȱ theȱ
authorityȱforȱthisȱdataȱrequisition.ȱ
SENSISȱ Theȱ mostȱ upȬtoȬdateȱ electronicȱ editionȱ ofȱ theȱ whiteȱ andȱ
yellowȱpagedȱphoneȱbooks.ȱȱ

142
Index
100–106, 122, 127, 130–132,
A 137–139, 142
Access Card, 48 Denmark, 41
Analytics, 6–7, 14–20, 22–27, 29, 35, Discrepant, 15, 25, 67, 71–72
37–38, 40, 42, 46–48, 55–65,
69–70, 72–73, 78–79, 86–92, 94, E
95–96, 100–101, 103–106,
Electronic Lodgement Service, 35
133–134, 136–138, 140
Electronic transmission, 29, 80, 85–86,
Assessable income, 13, 50, 61
138
e-tax, 24, 42, 54, 84–85
B
Bank interest, 24, 84 G
Business Activity Statements, 34, 50,
Governance, 5, 16, 26, 47, 94–96, 148
114, 123
Guidelines, 17, 21–22, 26, 28, 33–34,
Business line, 15, 17, 20, 26, 37–40,
48, 52–54, 56, 73, 76–77, 91, 94,
48, 52, 59, 63, 69, 72–76, 79, 81,
105, 139
88, 94–95, 100, 102, 104–106, 133
Business solutions, 39, 40, 63, 94
I
C Identity matching system, 18, 63–64,
66, 68
Capability, 5, 7, 13–14, 16–26, 29, 34,
Income tax, 5, 7, 13, 27, 29, 42, 50, 57,
35, 37, 40, 42, 46–47, 57–60, 65,
63, 68, 83–86, 90–91, 98–100, 115,
68, 70, 78, 80, 89, 90–92, 94–96,
117, 123, 125, 127, 130, 135–136
101, 103, 105, 142, 145, 148
Income tax return, 5, 7, 27, 29, 42, 50,
Change program, 18–20, 26, 39–40,
57, 83–86, 90–91, 98–100, 115,
59, 67–68, 70, 81, 87, 89, 92, 101,
117, 123
104, 106
Indirect tax, 13
Childcare Rebate, 24, 84
Integrated Core Processing, 8, 16, 23,
Compliance, 5, 7, 13–17, 19–27,
39, 47, 57, 60
33–34, 37–38, 41, 44, 46–48,
52–55, 58–59, 61–63, 69–70, 73,
75–77, 79, 81, 86–92, 94, 96–101, L
104–107, 122–131, 133–134, Legislated data, 6, 15, 19–20, 25, 36,
145–147 51–52, 69–72, 79–82, 85–86, 102,
Compliance Model, 7, 13, 19, 23, 46, 104, 106, 118, 138, 142
59, 61–62, 81, 89 Legislative framework, 20, 50
Computer-based methodologies, 17,
22, 47, 57–58
M
D Managed fund, 24, 84
Mathematical, 14, 17, 92
Data matching, 6–7, 13–29, 33–35,
37–38, 40, 43–48, 50–65, 70–73,
75–77, 79, 82–83, 85–92, 94–97,

143
N S
Negative search, 18, 28, 67, 69–70, Self employment, 15, 19–20, 51, 142
142 Self-Assessment System, 13, 33, 46,
Non-individual, 18, 28, 66, 69–70, 86, 61
117, 121 Standard business reporting, 40, 42,
Non-lodgement, 15, 37, 97, 139 48, 108
Nordic, 41, 85 Statistical, 14, 17, 92, 137–138, 141
Strategic plan, 18, 26, 29, 63, 89,
O 92–93, 95
Obligation, 13, 41, 43–44, 46, 54, 59,

T
61–62, 72, 80, 85, 87–88, 98, 104,
118–119, 122–131, 133–135, 142 Tax agent, 6, 21, 24, 34, 39, 42, 54,
84, 105, 107, 114–115, 117–118,
P 133, 135
Tax File Number (TFN), 9, 16, 19,
Personal property, 43 23–24, 29, 33–34, 36–37, 39, 45,
Portal, 24, 35, 54, 84 47, 50, 57, 60–61, 66, 73, 76,
Post-assessment, 18, 20, 24, 58, 91 82–83, 85–87, 98, 107, 114–115,
Pre-filling, 5, 18–19, 24, 27, 29, 40–42, 119, 120, 132, 142
57–59, 64, 67, 69, 83–86, 90–91, Taxpayer, 6, 13–16, 19, 23–25, 27, 29,
94, 142 33–34, 37–42, 45–47, 50, 54,
Protocol, 21, 28, 44, 53, 56, 78, 94, 57–58, 59–63, 66, 70, 81, 83–86,
102, 105–106 88–91, 97–98, 101, 104–105, 107,
114–115, 118, 121, 123–124, 133,
R 136–137, 141
Third party, 19, 24, 27, 29, 34, 36, 38,
Revenue, 8, 13, 16–17, 19–20, 22–23,
41, 46, 52, 54, 60, 67–68, 82,
25–26, 33, 41, 44–47, 51, 59,
85–86, 89, 107
61–63, 66, 70, 75, 77, 88, 90, 92,
Treasurer, 42, 133
100, 108, 121, 124, 127, 129–130,
134, 136, 142
Risk, 13–17, 19–20, 22–23, 26, 37–38, U
46, 47, 50–51, 54–55, 57–63, 65, Un-disclosed income, 15, 37, 139
73, 77–79, 81, 86–92, 95, 100, 104,
106–107, 121, 133–136, 142, 146

144
Series Titles
Acquisition of the ABRAMS Main Battle Tank
Department of Defence
Defence Materiel Organisation

Electronic Travel Authority Follow-up Audit
Department of Immigration and Citizenship

Australian Technical Colleges Programme
Department of Education, Science and Training

Container Examination Facilities Follow-up
Australian Customs Service

National Cervical Screening Program Follow-up
Department of Health and Ageing

Australia’s Preparedness for a Human Influenza Pandemic
Department of Agriculture, Fisheries and Forestry

The Senate Order for Departmental and Agency Contracts (Calendar Year 2006
Compliance)

Proof of Identity for Accessing Centrelink Payments
Centrelink
Department of Human Services

Australian Apprenticeships
Department of Education, Science Training

Whole of Government Indigenous Service Delivery Arrangements

Management of the FFG Capability Upgrade
Defence Materiel Organisation

145
Administration of High Risk Income Tax Refunds in the Individuals and Micro
Enterprises Market Segments

The Australian Taxation Office’s Approach to Managing Self Managed Superannuation
Fund Compliance Risks

Performance Audit of the Regional Partnerships Programme:
Volume 1–Summary and Recommendations
Volume 2–Main Report
Volume 3–Project Case Studies
Department of Transport and Regional Services

Administration of Australian Business Number Registrations: Follow-up Audit

Data Integrity in the Child Support Agency
Child Support Agency
Department of Human Services

Management of the IT Refresh Programme
Centrelink
Audit Report No.18 2007-08

Audits of the Financial Statements of Australian Government Entities for the Period
Ended 30 June 2007

Administration of the Automotive Competitiveness and Investment Scheme
Department of Innovation, Industry, Science and Research
Australian Customs Service

Accuracy of Medicare Claims Processing
Medicare Australia

Regional Delivery Model for the Natural Heritage Trust and the National Action Plan for
Salinity and Water Quality
Department of the Environment, Water, Heritage and the Arts
Department of Agriculture, Fisheries and Forestry

146
Series Titles

Administration of Grants to the Australian Rail Track Corporation
Department of Infrastructure, Transport, Regional Development and Local Government

The Management of Cost Recovery by Selected Regulators

DIAC’s Management of the Introduction of Biometric Technologies
Department of Immigration and Citizenship

Administering Round the Clock Medicare Grants

Tasmanian Forest Industry Development and Assistance Programs
Department of Agriculture Fisheries and Forestry

Emergency Management Australia
Attorney-General’s Department

Defence’s Compliance with the Public Works Committee Approval Processes

Parent School Partnerships Initiative
Department of Education, Employment and Workplace Relations

147
Current Better Practice Guides
The following Better Practice Guides are available on the Australian National Audit
Office Website.
Public Sector Internal Audit

An Investment in Assurance and Business Improvement Sep 2007
Fairness and Transparency in Purchasing Decisions
Probity in Australian Government Procurement Aug 2007
Administering Regulation Mar 2007
Developing and Managing Contracts
Getting the Right Outcome, Paying the Right Price Feb 2007
Implementation of Programme and Policy Initiatives:
Making implementation matter Oct 2006
Legal Services Arrangements in Australian Government Agencies Aug 2006
Preparation of Financial Statements by Public Sector Entities Apr 2006
Administration of Fringe Benefits Tax Feb 2006
User–Friendly Forms
Key Principles and Practices to Effectively Design
and Communicate Australian Government Forms Jan 2006
Public Sector Audit Committees Feb 2005
Fraud Control in Australian Government Agencies Aug 2004
Security and Control Update for SAP R/3 June 2004
Better Practice in Annual Performance Reporting Apr 2004
Management of Scientific Research and Development
Projects in Commonwealth Agencies Dec 2003
Public Sector Governance July 2003
Goods and Services Tax (GST) Administration May 2003
Managing Parliamentary Workflow Apr 2003
Building Capability—A framework for managing
learning and development in the APS Apr 2003
Internal Budgeting Feb 2003
Administration of Grants May 2002
Performance Information in Portfolio Budget Statements May 2002

148
Current Better Practice Guides
Some Better Practice Principles for Developing

Policy Advice Nov 2001
Rehabilitation: Managing Return to Work June 2001
Business Continuity Management Jan 2000
Building a Better Financial Management Framework Nov 1999
Building Better Financial Management Support Nov 1999
Commonwealth Agency Energy Management June 1999
Security and Control for SAP R/3 Oct 1998
Controlling Performance and Outcomes Dec 1997
Protective Security Principles
(in Audit Report No.21 1997–98) Dec 1997

149

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The Auditor-General

Audit Report No.30 2007–08

The Australian Taxation Office’s Use of Data

Australian Taxation Office

Australian National Audit Office

ISBN 0 642 81011 7

This work is copyright. Apart from

Requests and inquiries concerning

ANAO Audit Report No.30 2007–08

The Honourable the President of the Senate

ANAO Audit Report No.30 2007–08

The Auditor-General is head of the

For further information contact:

Telephone: (02) 6203 7505

ANAO audit reports and information

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

HECS/SFSSȱ Higherȱ Educationȱ Contributionȱ Scheme/Studentȱ Financialȱ

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

Audit objective and scope

ANAO Audit Report No.30 2007–08

therefore,ȱ byȱ aȱ broaderȱ definitionȱ ofȱ ‘dataȱ matching’:ȱ meaningȱ ‘findingȱ

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

Key findings by chapter

ANAO Audit Report No.30 2007–08

Notices of intention to conduct data

Source: Tax Office

ANAO Audit Report No.30 2007–08

Chapter 3: data matching and analytics capability in the Tax Office

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

- Number of individual records identity matched at a high 28,222,567 28,640,996 28,603,493

- Number of individual records subject to income matching 17,306,225 17,643,022 17,582,283

- Number of potentially discrepant cases 320,211 345,274 132,243

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

Summary of agency response

ANAO Audit Report No.30 2007–08

Recommendation Theȱ ANAOȱ recommendsȱ thatȱ inȱ orderȱ toȱ achieveȱ

ANAO Audit Report No.30 2007–08

Recommendation Theȱ ANAOȱ recommendsȱ thatȱ toȱ simplifyȱ incomeȱ taxȱ

Recommendation Theȱ ANAOȱ recommendsȱ thatȱ theȱ Taxȱ Officeȱ developȱ aȱ

Recommendation Toȱ minimiseȱ duplicationȱ andȱ closeȱ gapsȱ inȱ

Recommendation Toȱ improveȱ theȱ efficiencyȱ andȱ effectivenessȱ ofȱ theȱ

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08

The Australian Taxation Office

Data matching legislation and guidelines

ANAO Audit Report No.30 2007–08

Data matching in the Tax Office

Data acquisition and identity matching

ANAO Audit Report No.30 2007–08

ANAO Audit Report No.30 2007–08