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ATO eyes lifestyle assets

If you count yourself lucky in life you may have accumulated some of the trappings of the wealthy: a fine art collection; a luxury yacht; or even an airplane. However, if you own lifestyle assets and aren’t sure if you’re in compliance with ATO requirements, now is the time to check.

At the end of 2019 the ATO announced it would be gathering another five years of data from 30 insurers to check up on taxpayers and their lifestyle assets.

The list of 30 insurers include AAMI, Allianz, CGU, GIO, NRMA, RACQ, RACV, Suncorp, and Youi as well as the likes of Nautilus Marine and Lumley.

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 $3m yacht then this is likely to raise some red flags,” she said.

Apart from helping to identify taxpayers who may be understating 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,” Ms Jenkins said.

So it will be matching the information on lifestyle assets held by about 350,000 taxpayers each financial year from 2015-16 to 2019-20.

The lifestyle assets that will be scrutinised by the ATO are those that are valued at, or above, a particular amount.

Insurers will be required to provide the ATO with detailed policy information where the value of the asset 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; and
  • Aircraft $150,000.

The data will also be used to identify incorrect goods and services tax (GST) input tax credits where taxpayers are purchasing the assets for 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.

It will also take a dim view of self-managed superannuation funds that it suspects may be acquiring lifestyle assets purely for personal enjoyment of the fund’s trustee or beneficiaries.

The ATO emphasises that the data obtained will not be used directly to initiate compliance activity. But it will be made available to compliance staff and it may then prompt them to initiate a particular line of enquiry.

The ATO’s lifestyle assets data-matching program has been in place since February 2016. It has already collected data on insurance policies for the 2013-14 and 2014-15 financial years.

If you are concerned that you may have failed to properly comply with your tax or superannuation obligations it might be best to ‘fess up.

The ATO encourages taxpayers in that situation to either speak to their tax professional 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, according to the ATO.