«We’re getting more sophisticated in our data matching capabilities and we can now access bank data, third party data, and data from various platforms that people are using,» he says.
The reporting scheme is currently in place for the building and construction sectors and companies working in the courier and cleaning services will be reporting from July 1.
The IT, security, surveillance, road freight and investigations sectors will have to start keeping tabs on all of their contractors from July in order to give the tax office details in mid-2020.
Holt says businesses must start checking their contractor’s invoices now and collect up to date Australian Business Number information in preparation to report to the tax office.
Failure to provide these reports can result in ‘failure to lodge’ penalties, the maximum of which is more than $5,000 for larger businesses.
Once that information is collected, the ATO will be able to build a picture of how much income contractors are making and then will take action if there are big variances between what they have as an estimate and what is reported.
«Someone might be not declaring income of upwards of say, $10,000 — that would be of interest to us,» Holt says.
Chartered Accountants Australia has urged caution as the program is expanded, suggesting in a submission to the ATO that contractors should be able to come forward to voluntarily disclose any tax they may have underpaid in prior years.
Twelve Chartered Accountants founder Derek Nolan say small businesses are not prepared for the amount of paperwork the reporting will take.
«People aren’t ready for this at all,» Nolan says.
«What I’ve found is that one piece of information is wrong or missing, once it gets to the tax office it will be rejected.»
Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.