ATO set to introduce real-time data matching

The Australian Taxation Office (ATO) has announced it will use real-time data tracking on passengers coming into and out of Australia.

The ATO will look to access historic and future data to improve compliance with Australian tax obligations.

BDO Australia has cautioned that individuals need to be mindful of the tax issues which might arise if they are usually based outside of Australia but return home.

Overseas employers should also be aware they need to track employees coming to Australia and potentially take steps to manage unforeseen Australian tax obligations.

James Trainor, Tax Partner at BDO in Australia said, with ATO estimates indicating around 670,000 individual records will be obtained each financial year, the new data matching could see returning Australians liable to pay tax on overseas income.

“Aussies returning home could now face a tax bill on their overseas earnings,” James said.

“In the post-pandemic environment, expats are keen to come home but continue to work for their foreign employer. They and their employer could now be asked to pay up.”

“There are two scenarios that would trigger tax implications for Australian employees and foreign employers of Australians.

  1. Employees: Australians working overseas for extended periods are typically not taxed in Australia on their overseas income. However if that person frequently returns to Australia, for example because their family has remained here, then Australia may seek to tax all of the overseas income. The ATO will now have ready access to data to determine how frequently the person has been in Australia. Australians working in low or nil tax countries (i.e. UAE, Singapore and Hong Kong) are particularly impacted.
  2. Employers: Australians who are usually based overseas for work may decide to return to Australia to ride-out COVID and work in Australia remotely for their overseas employer. Extended periods spent working in Australia could result in the employee being subject to income tax in Australia on the salary, which is paid by their overseas employer. The overseas employer also has employer tax obligations, such as income tax withholding from the salary, superannuation, fringe benefits tax and payroll tax. Further the employee may cause the overseas employer to have a taxable presence in Australia, notwithstanding it does not have a registered business in Australia. The actions of the employee may have ramifications for the employer, and we are aware of cases where the employer does not know where its employees are working, so the employer tax obligations and potential penalties for failure to comply are sleeper issues for the employer. However, the ATO will be armed with information, which may surprise some employers.