In attempt to understand the assets and wealth of particular tax payers, the ATO is expanding it’s focus on those purchasing lifestyle assets.

What is a lifestyle asset?

Lifestyle assets are personal assets and include things such as luxury cars, boats, aircrafts, horses, artwork and collectables.

What information are they looking at?

The data matching capabilities of the Australian Taxation Office (ATO) has expanded significantly in the last few years.

Data matching has been around for a while with, becoming a focus back in 2016 and the ATO confirms their data matching capabilities of extracting data from a number of sources, including insurance policies held on “lifestyle assets”.

We expect that the systems they put in place now make matching this information more easily reviewed via algorithms, this review process is expected to continue and improve and expand the information they access and utilise.

As a guide, the following asset thresholds were initially proposed as a flag, where the value is equal to or exceeds a nominated minimum amount.

Why are the ATO looking at this?

The ATO has indicated that it’s objectives are to address a number of known taxation risk areas, including:

• taxpayers accumulating or improving assets with insufficient income reported in their tax returns to show the financial means to pay for them.
• taxpayers disposing of assets and not declaring the revenue and/or capital gain.
• taxpayers purchasing assets for personal use through their business or related entities and claiming GST credits they are not entitled to.
• taxpayers purchasing assets through their business entities with no apparent nexus to the business activities, but rather applying those assets to the personal enjoyment of an associate or employee giving rise to a fringe benefits tax obligation.
• self-managed super funds (SMSFs) acquiring assets but applying them to the benefit of the fund’s trustee or beneficiaries.

Where there appears to be a discrepancy in information in the above areas, the ATO will contact them to provide opportunity to verify the information or provide an explanation.

Please be aware of the increasing capabilities of the ATO when making decisions around purchases and how those assets are to be funded or utilised.

How Can Alto Help?

If you, your business or SMSF has purchased lifestyle assets valued above the minimum thresholds and need help to ensure that you’ve applied the correct tax treatment, please contact the Alto Team

Author: Steve Payne