9 July 2020
The ATO has long been concerned with compliance associated with the cash economy, and undertakes many different investigative activities each year to identify and penalise individuals and entities partaking in the cash economy.
A relatively new audit approach sees the ATO cross-referencing insurance policies of luxury assets (e.g. boats, luxury cars and planes) with the income being disclosed by a particular taxpayer.
In particular, the ATO will be obtaining insurance policy information from over 30 insurance providers (e.g.,AAMI, GIO, RACV Insurance, Resilium, SGIO, Shannons and Club Marine) about the following classes of assets whose value is equal to, or exceeds the following nominated thresholds:
- Marine vessels (e.g., boats) valued at $100,000 or more.
- Motor vehicles valued at $65,000 or more (including luxury cars, and vintage/antique cars).
- Fine art valued at $100,000 or more per item.
- Thoroughbred horses valued at $65,000 or more; and
- Aircraft (e.g., private jets) valued at $150,000 or more.
Broadly speaking, the objective of the data matching program is to identify potential compliance issues with income tax, CGT, FBT, GST and superannuation obligations, for those taxpayers who have insured the above categories of assets. This includes identifying taxpayers who are accumulating ‘lifestyle’ assets (e.g., boats, luxury cars and artwork), but have not reported sufficient income in their tax returns to reasonably pay for such assets.
How the ATO obtain and use the data
The data in this program will not be used directly to initiate automated compliance activity. Taxpayers selected for ATO compliance investigations are identified through other methodologies.
The lifestyle assets data is made available to ATO compliance staff to support risk profiling of the selected taxpayers. Existence of an insurance policy may prompt the compliance officer to pursue a particular line of enquiry.
TAX WARNING – Lifestyle assets owned in other entities
As noted above, the ATO will be collecting information about lifestyle assets owned by individuals and non-individuals. Where assets are owned by non-individuals (e.g., by companies or trusts), taxpayers should be aware that there may be significant FBT and/or income tax consequences (e.g., under Division 7A) where the particular asset is held within an interposed entity and is then used by individuals for private purposes.