ATO faces the music over alleged incorrect SGC data saga

During the committee hearing, Senator Malcolm Roberts said: “If the search [on the ATO system] returns blank, that does not mean that the superannuation was never paid; it means your later system does not hold that data. It seems that directors were wrongly charged.”

Roberts noted that the modernised Australian tax system only contains records from 1 July 2018, and that any records prior to this date are on the member contribution statement archive.

“Why have ATO staff not been trained to understand that the modernised Australian tax system only contains records from 1st of July 2018, that a blank result does not mean non-payment and that the member contribution statement archive must be consulted before any pre-2018 debt is raised? On that basis, how can any of these debts be considered lawfully raised?” Roberts said.

In response, Second Commissioner of Taxation Jeremy Hirschhorn said that although he was sceptical about this claim, he was happy to look into it, requesting that Roberts provide records of these specific complaints for the ATO’s perusal.

“What you describe does not sound to me like what is happening,” Hirschhorn said.

In a statement provided to Accountants Daily, an ATO spokesperson said: "The ATO does not issue automated Superannuation Guarantee (SG) assessments or penalties."

ATO’s data matching under fire

Hirschhorn admitted to the committee that the ATO has used “what would be described as AI” for decades. While he said this, Hirschhorn stressed that this AI is separate from its data matching.

“Generally, when we do run data matching programs, we do our best not to fall in the trap of what I've described as data hubris. Data is just data, and it can have errors in it,” Hirschhorn said.

“Our general posture when we see what look to us like taxpayer errors in our data, our general stance is to show that data to the taxpayer and to give them a chance to understand what we think we know about that person and to either take action or explain the discrepancy,” Hirschhorn said.

Accountants Daily has viewed a superannuation guarantee (SG) “nudge letter” that the ATO issued to one small business owner with the heading: “Your data shows you may not have met your quarterly super guarantee (SG) obligations”.

The letter informs the recipient that they may need to lodge an SG Charge (SGC) statement and “pay now”.

According to the letter, the recipient is responsible for any incorrect information that the ATO provides in the letter.

“If the information is incorrect, it may be due to reporting errors which you may need to fix,” the letter reads.

It then gives the business owner the option of either phoning the ATO or contacting their tax agent if the information is incorrect.

"A nudge letter is not an assessment of SG, nor does it impose penalties. A nudge letter also does not automatically escalate to an audit," the ATO spokesperson said.

"...employers can voluntarily disclose any unpaid super, without further intervention from the ATO, by lodging an SG statement."

"...in the event an employer does not act to review their position, SG assessments may be made and penalties applied if the ATO subsequently identifies in an audit that the employer has failed to meet their SG obligations in respect of their employees."

Shadow treasurer demands answers

Further, the letter reveals that in its data matching, the ATO based its assessment of allegedly unpaid SG on “information you reported through Single Touch Payroll reporting and information your employees' super funds reported to us”.

“One of the things that's most distressing we're asking about in the Senate today is they're now matching Single Touch Payroll data with superannuation data and saying if there's any discrepancy that they're assuming a small business hasn't paid super on time, even though they have no evidence to substantiate that, and threatening small businesses with 200 per cent fines if they don't basically bow to the ATO's demands,” federal shadow treasurer Tim Wilson said on a 3AW interview on Wednesday.

The ATO spokesperson confirmed that the 200 per cent top penalty rate may apply for outstanding SG liabilities.

“We believe very strongly the ATO should respect taxpayers. We've also proposed a Small Business Act, which is a legal shield for small businesses, particularly around things like the right to be heard in decision-making around the ATO, around the Reserve Bank and others to make sure that government's actually listening,” Wilson told host Tim Elliott.

Before the committee sat for hearing, Wilson told Peter Stefanovic on News24 that he wanted to know how the data matching system works, to what extent it is automated, and whether small businesses were deliberately targeted.

While many questions were taken on notice by the ATO during the hearing, it was asked by the Senate Committee what will become of taxpayers who have never owed a debt.

“How many taxpayers have been treated by way of this debt waiver mechanism where they never in fact owed a debt?” Roberts asked.

“[In the circumstance where] they never owed a debt because it was the taxation office that was at fault, but then they were levied a debt, and then they were waived,” Roberts said.

Heferen said: “I hazard a guess it would be zero, but we'll take that on notice.”

Also dealt with during the hearing was the data that the ATO had on how many small businesses paid tax by credit card. While the ATO released a statement confirming that this was five per cent of all small businesses, after a smattering of questions, Heferen revealed a more numerical response.

This was that 256,000 small businesses used this payment method according to “actual” data, not modelled data.

This comes off the back of widespread scrutiny of the credit card ban that forced the ATO’s hand in extending the payment option until July next year.

Editor's note: This story has been updated since publication.