The Australian Taxation Office (ATO) has broadened data matching activities on lifestyle assets for the 2021 financial year through to the 2023 financial year.
Which assets are included in the program?
What’s on the ATO’s radar?
The ATO data matching program aims to identify the following situations:
- Taxpayers who have been purchasing assets, but who have a low taxable income on their tax return;
- Tax returns which do not show a capital gain on the sale of the above assets;
- Taxpayers who are claiming GST credits through their businesses for the above assets but using the assets for personal enjoyment;
- Self-managed superannuation funds acquiring assets which are used for the personal benefit of the members; and
- Taxpayers who are using the above assets for personal enjoyment, or the enjoyment of an associate or employee, which may create a liability for fringe benefits tax.
Medical professionals are already data-matched against others with similar occupation codes to identify tax returns where income is under-disclosed and deductions are over-claimed.
In terms of the first above listed situation the ATO are aiming to identify, we do not foresee many medical professionals showing a low taxable income in their tax returns. However it is possible that the ATO could identify situations where a lifestyle asset has been purchased in a lower earning spouse’s name for asset protection purposes. While this is not a problem in itself, it may cause unwanted ATO attention. For the other four situations listed above there are many instances where the correct tax treatment of lifestyle assets can be overlooked by the taxpayer. For example, the sale of valuable artworks is subject to capital gains tax however this is not widely realised and may be overlooked if the correct advice is not given.
What action will the ATO take?
It is important to note that the ATO is not using this data to automatically initiate compliance activity, but to build a risk profile for the taxpayer and their related entities.
If an individual is identified for not complying with their tax obligations there will likely be recommendations made for compliance action to be instigated. Escalation for prosecution may be initiated for those who fail to comply with obligations even after being prompted.
Where a taxpayer is correctly meeting their obligations, the use of the data will reduce the likelihood of contact from the ATO.
Taxpayers who make a voluntary disclosure can usually reduce administrative penalties and interest charges which normally apply on underpayments of tax.
The data collected by the ATO will be retained for 5 years.
To learn more about how the ATO’s lifestyle assets program may impact you, or for assistance with a voluntary disclosure, please contact Kristy Baxter or Janelle Kiernan from Pilot’s medical services division on email@example.com or (07) 3023 1300.