Will you be targeted by Tax Office?

CHEATING taxpayers who fail to take out private health insurance and then cook the books to escape penalty will be targeted for the first time.

The Australian Tax Office-led attack, which has about 400,000 Australians in its crosshairs, could save taxpayers millions of dollars.

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Medicare will be requested to hand over data from last year and from the next two years to determine who has claimed an exemption from the surcharge. The information will be cross-referenced with tax returns.

Most taxpayers who don't have private health insurance face a penalty – a Medicare levy surcharge of up to 1.5 per cent of taxable income. Australians are required to take out private health insurance once their income reaches a certain threshold.

An ATO spokesman said it was the first time the Medicare levy exemption certificate was being sought from the Human Services Department, and the operation would be targeted rather than random.

"Taxpayers could incorrectly claim an exemption from the Medicare levy surcharge in their tax return,'' he said.

"This program is aimed at reducing the risk of taxpayers claiming the exemption when they are not entitled to do so."

"This program is called the Medicare Levy Exemption Certificate data matching program and its purpose is to ensure taxpayers are not unfairly avoiding their obligations with paying the Medicare levy and in certain situations this extends to their Medicare levy surcharge.

"It's objectives are to ensure taxpayers who are exempt from the Medicare levy are receiving their entitled exemption; to ensure taxpayers not entitled to the exemption are not unfairly avoiding their taxation obligations; to promote voluntary compliance and strengthen community confidence in the integrity of the tax system and to provide possible opportunities to satisfy the ATO's wider compliance," the ATO spokesman said.

"(We will) cross reference information reported in tax returns against transactions provided to us by third parties.''

Medicare issues about 130,000 exemption certificates each year. Taxpayers may be exempt from paying the levy if they have medical reasons, are foreign residents or live on Norfolk Island.

A Human Services spokesman said under the arrangement with the ATO it would automatically share information about who had an exemption.