The Australian Taxation Office (ATO) has a team of “data doctors”.
While it sounds like something out of a sci-fi series, this group of data experts are modern-day private investigators employed by the tax office to make sure you aren’t lying on your tax return.
After it was revealed in the The Australian yesterday that the ATO is analysing data from people’s social media platforms to find if their declared income matches their lifestyles, Business Insider went to find out more about the processes and people behind their data mining.
Graham Whyte, assistant commissioner of marketing and communications at the ATO says the example of the family who reported two incomes of $80,000 and $60,000, but sent their children private schools and took a holiday to Whistler, flying business class, is one of “a number of examples”.
“For example we’ve had one where the taxpayer had no business income but when we did a ‘Google search’, if you like, we found that they had a website where they were operating an online business, and even a Facebook page promoting a photography business,” he said.
“Another one is we undertook an audit of a bar and what we identified was that bar was paying cash wages and was not returning all their income.
“But what was interesting was that when we were looking at the social media of people working [at the bar], for example entertainers likes DJs, was while they were receiving cash wages, they were certainly promoting their business and what they were doing on Facebook.”
So how do they do it?
Meet the “data doctors”.
Whyte says the team, made up of half a dozen data experts, has been a key investment for the ATO over the past five years.
“They are highly qualified… with doctorates in data mining and machine learning,” he said.
They’re also responsible for developing the models that identify “non-compliers”.
“What they do is throw out a bit of an indicator that things are not quite right,” Whyte says.
“It’s like coding what [private] investigators may have done in the past. It’s turning it into technology. And what that means is that it can cover a lot. The population of people who lodge returns is very high, it’s over 12 million.
“Not that long ago some of this data might have taken a week to crunch through on a computer, now it’s in milliseconds.”
And if you thought it was just your data from social media and school records that the ATO is watching, you’re wrong.
“Our first point of contact isn’t Facebook, generally what it is is something has thrown up a red flag, then we will start to look further,” said Whyte.
“We collect a lot of data — over 650 million pieces of data. We have quite sophisticated analytical techniques, we have powerful computers and our team of data doctors.
“We have developed a model that looks a lifestyle assets, part of our data-matching program, and so we gather information from a number of sources such as insurance policies for certain types of assets like marine vessels, motor vehicles, thoroughbred racehorses, fine art and aircraft, and for example if you have all these things and your income does not reflect that you could afford them then that will through up a red flag.
“We will then use any information that is legally available to us to enhance our understanding… [and] develop profiles with the analysis of individual cases.
“We all leave a digital footprint,” he said.
While the team is relatively small now, the ATO will continue to expand it to rein in an estimated $187.1 billion lost in tax that would be paid if all income was declared.
“I think we, like all organisations, are looking to how we can increase our sophistication in this area,” said Whyte.
“It’s an area we have been investing in for some time to develop quite sophisticated models and risk engines that are able the cover a lot of people and a lot of information very very quickly.”
With this in mind he warns people hiding income potentially leave themselves open to prosecution.
“The message is think twice. Don’t do it. The chances of getting caught are high. We have access to a lot of information,” he said.
“Part of that message as well is people are opening themselves up to substantial penalties and potentially prosecution.”
Whyte suggests if you are concerned that this might be you think about voluntary disclosure. That means that if you’re found to not have correctly reported your income and assets to the ATO, then either no penalties or significantly reduced penalties will apply.
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