Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas.
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Please contact us if you wish to discuss how the points raised in this edition specifically affect you.
Lifestyle assets continue to be an ATO audit target
The ATO has revealed it will request 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.
The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2016 to 2020 as part of its data-matching program.
This information (provided by insurers) is intended to be used by the ATO as part of its compliance profiling activities.
For example, ATO Deputy Commissioner Deborah Jenkins said:“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.”
She 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 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.
It will also be used by the ATO to identify incorrect claims for GST input tax credits where taxpayers are incorrectly claiming GST credits as if the (private) item was a business asset.
Additionally, SMSFs the ATO suspects may be acquiring lifestyle assets purely for the personal enjoyment of the fund's trustee or beneficiaries are also likely to be looked at by the ATO.
Insurers are required to provide the ATO with policy information where the value of assets is equal to or exceeds the following thresholds:
Note: If you feel that you may be targeted by this latest ATO data collection activity and are concerned about the implications, please feel free to contact our office to discuss your individual circumstances.
Ref: ATO website, 18 December 2019
Disclosure of business tax debts – Declaration made
Following the enactment of legislation in late 2019, the ATO can disclose certain business tax debt information to external credit reporting bureaus.
This information will primarily be used when issuing external creditworthiness reports in relation to relevant businesses, effectively treating tax debts in a similar manner to other business debts.
More recently, the Government issued a Declaration to determine exactly what class of entities may be subject to such disclosures, including entities that:
– tax debts where the entity has an arrangement to pay the ATO by instalments (i.e., via a payment plan);
– tax debts subject to an application for release on grounds of hardship; and/or
– tax debts subject to dispute via an objection, AAT or Federal Court review that has not been finalised.
Additionally, the Declaration does not allow debt disclosure for taxpayers who have an active complaint concerning the disclosure of tax debt information that is, or could be, the subject of an Inspector-General of Taxation (‘IGOT’) investigation.
Importantly, if there is such a complaint, the ATO can only proceed with a disclosure of the debt where it is not aware of it after taking reasonable steps to confirm whether the IGOT has such a complaint.
Ref: Taxation Administration (Tax Debt Information Disclosure) Declaration 2019