Big Brother is Always Watching !

Today we wish to highlight some issues relating to Social Media use.

Social media usage has grown to become one of the most pervasive cultural phenomena in the developed world. According to numerous surveys more than two-thirds of Internet users participate in a social networking site (I know I do), with most focused towards Facebook, Twitter, Pinterest and Instagram.

This growing percentage is of course not surprising. Nor is it surprising that the increased use of social media erodes our privacy. What is surprising however, is that most users don’t consider the associated risks of their posts, especially when embellishing their online profile with holiday snaps, fancy meals, designer threads, jet skis, expensive toys, private school snaps, new cars and the like.
Many users will think so what? Who cares who posts what on social media and who cares about a little embellishment? The answer is perhaps more troubling than you might think!

That’s because the Tax Office cares!!!

You may be surprised to learn that the Tax Office has employed a team of data-mining specialists, or data doctors. Their sole objective is to look online at social media sites such as Facebook and Instagram to determine if what people are posting, seems logical compared to what they’re reporting in their tax returns. It’s fair to say that these ‘data doctors’ are a little more advanced than flicking through feeds, hoping to catch people out. In fact, they are honing models that identify “non-compliers and tax dodgers,” so that complex programs do the scrolling for them.

Data matching is of course not an entirely new audit approach. The ATO have for years been matching tax file numbers, to discover undeclared interests and investments. They data match registration and stamp duty paperwork for boats and properties etc and undertake much more complex practices during income and expense audits. Social media however, adds a whole new dimension and means that bragging could land users in a whole lot of hot water, if the ATO thinks an online profile conflicts with real life declarations.

Basically the ATO are using social media channels to develop social profiles on taxpayers and the increased number of ‘please explain’ letters, indicate their efforts are ramping up. So what are they looking for when they’re checking out social media feeds?

Incorrect expenses

Facebook posts might not be revealing undisclosed income but it may expose a dubious claim. Posting photos enjoying a family vacation across Europe, whilst lodging a claim for an overseas work conference at the same time may be problematic. Or perhaps claiming that a holiday house is never used because it’s available for rent for the entire year and yet posting photos of long weekends spent enjoying it, on Instagram. You get the idea…

Cash income

If a modest income is being declared whilst posting pictures of a multimillion-dollar home on Instagram, or a luxurious overseas vacation on Facebook, the Tax Office might do more than just “like” the post. It may trigger them to start adding up the cost of the apparent lifestyle and initiate an audit to gather more intelligence on whether spending habits exceed reported income.

Business income

It might be a Facebook page or a website set up for a business that hasn’t yet been declared in a tax return. Or perhaps running an Ebay business which boarders in the murky waters of a hobby versus business. Either way, understand reporting obligations is important if a potential customer can find you, then the Tax Office data doctors can find you, resulting in your very own ‘please explain’ letter.
If people have claimed to be unemployed on their tax return but were caught sharing links and comments to their online business, they would find themselves under scrutiny as well.

The ATO only looks at what is publicly available. Therefore concern that they’re becoming a little too intrusive may result in changing privacy settings on social media accounts, so that access to what is being posted is restricted. However, with so much information available online, including selling second-hand luxury goods on e-commerce sites, one may still find oneself under the watchful eye of the data doctors.
Of course, there’s always the old proverb ‘if you have nothing to hide then you have nothing to lose’ however it’s fair to say ‘prevention is always better than cure’ especially when the ATO are involved.

We don’t want those HAPPY SNAPS resulting in NOT SO HAPPY RETURNS.

We are not suggesting for one moment of course, that any of our clients are hiding assets or fudging financial records.

We simply wish to highlight the way in which use of Social Media can have unexpected knock-on effects.