The Australian Taxation Office (ATO) has announced it will be requesting a further five years’ worth of policy information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high value motor vehicles and aircraft. Insurers have been asked to provide the ATO with policy details for “ lifestyle assets ” over certain asset value thresholds as part of the agency’s efforts to ensure taxpayers are fulfilling their tax and superannuation reporting obligations.
The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2015–16 to 2019–20 as part of its data-matching program. The information provided by insurers will be used by the ATO as part of compliance profiling activities.
ATO Deputy Commissioner Deborah Jenkins said knowing who owns these lifestyle assets such as private jets and yachts helps the agency get a more complete picture about the actual financial situation of taxpayers as compared with what is reported on tax returns.
“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three-million-dollar yacht then this is likely to raise some red flags,” Ms Jenkins said.
“Regardless of your level of wealth, we all need to pay the correct amount of tax, and this data will allow us to ensure those people who can afford these kinds of items are doing the right thing, along with everyone else.”
“Doing things like being untruthful about your income or failing to declare capital gains is effectively stealing from the community – and this is money the community is missing out on to pay for infrastructure and services we all rely on like schools, hospitals, and roads.”
Ms Jenkins clarified that the data will not be used to initiate automated compliance activity.
“Taxpayers selected for compliance activities are identified through other methodologies. The data is made available to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or may not prompt the compliance officer to pursue a particular line of enquiry”.
Aside from helping identify taxpayers who may be under-stating their income, the data from insurers may be used by the ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this to the ATO.
“With high value assets like fine art, there can be some significant capital gains made when these assets are sold, and capital gains tax may need to be paid on the sale or disposal of these items.”
The data will also be used by the ATO as part of their risk profiling activity to identify incorrect goods and services tax (GST) input tax credits where taxpayers are purchasing the assets for purely personal reasons and claiming GST credits as if the item was a business asset.
“If we discover incorrect GST input tax credit claims for items purchased for personal reasons, we’ll be following up and seeking full repayment on top of any applicable interest and penalties” Ms Jenkins said.
Self-managed superannuation funds that the ATO suspects may be acquiring lifestyle assets purely for personal enjoyment of the fund’s trustee or beneficiaries are also likely to be looked at by the ATO.
Insurers will be required to provide the ATO with detailed policy information where the value of assets is equal to or exceeds the following thresholds:
- Marine vessels – $100,000
- Motor vehicles – $65,000
- Thoroughbred horses – $65,000
- Fine art – $100,000 per item
- Aircraft – $150,000
The ATO’s lifestyle assets data-matching program has been in place since February 2016. Under the program, the ATO has already collected data on insurance policies for the 2013–14 and 2014–15 financial years. You can find the full list of insurers required to provide information here – https://www.ato.gov.au/General/Gen/Lifestyle-Assets-Data-Matching-Program-Protocol/
- If you suspect that you have failed to comply with your tax or superannuation obligations we encourage you to speak to your tax advisor or make a voluntary disclosure to the ATO. Taxpayers who make a voluntary disclosure can generally expect a reduction in the administrative penalties and interest charges that would normally apply.
- If you have any questions about issues raised in this article or need further advice, please contact our tax specialists. You can reach us on (07) 3023 4800 or at firstname.lastname@example.org.
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