"The ATO has employed a team of datamining specialists, whose role it is to look online at things like Facebook and social media to see if what people are reporting matches up with reality," technology lawyer Paul Gordon said.
He said people who claimed to be unemployed on their tax return but were caught sharing links and comments to their online business would find themselves under scrutiny.
"If I am saying I am unemployed, on zero income, and happen to have an online business — they'll look into that."
Mr Gordon said the data miners were also interested in your social media activity, supposed spending and declared income to make sure it added up.
"The really interesting thing about this is that it is not private data that they are looking at, it's very publicly available data that people are voluntarily putting out there," he told 891 ABC Adelaide's Drive program.
Happy snaps may lead to not-so-happy tax returns
Mr Gordon said some social media users' obsession with posting every detail of their lives to their accounts could be their downfall.
"The big one you will see is holidays," he said.
Mr Gordon said the ATO used techniques such as machine learning — automated systems programmed to recognise and pick up keywords — to flag potential tax dodgers.
"When there is a red flag they will look at it with manual processors," he said.
Manual processors can then recommend a person be audited if there are large disparities between that person's tax returns and their social media activity.
Mr Gordon said people needed to be aware of the ramifications of what they were publicly posting.
"We come back to the perpetual issue of internet and privacy — they are really not compatible.
"If you are putting things up online, assume that someone is going to read them."
Big Brother syndrome
Mr Gordon said although everything being done by the ATO was legal, he acknowledged it did feel invasive.
"There is something a little creepy about [data mining] even though it is public information," he said.
"This is where we come back to the point that we do not have a right of privacy in Australia, and this kind of action will keep on pushing us towards the question of whether we should have one."