300,000 Australians face ATO audit over luxury goods
Aussies who have splurged on everything from luxury boats and cars to thoroughbred horses and art have been warned to declare all their income by the Australian Taxation Office or risk being audited.
The ATO has its sights set on about 300,000 people who have spent $65,000 or more on cars, $150,000 or above on boats or $100,000 per fine art item to uncover if they are hiding income or are overstating deductions.
ATO Assistant Commissioner Tim Loh said this isn’t a “game of Monopoly” and the organisation is on the lookout for red flags.
“When it comes to hiding income from the ATO, this isn’t a game of Monopoly where you can roll the dice and avoid the income tax box,” he said.
“We get data from a range of sources, and we use our analytics tools to run our eyes over that data and look out for where people aren’t declaring their income or are overstating their deductions. One of the areas we focus on is lifestyle assets – whether that’s a boat or a luxury car or a piece of fine art.
“If a taxpayer is spending a lot of money on expensive lifestyle assets, but that doesn’t marry up with the income they’re declaring on their tax return, then that’s a red flag for us. If someone isn’t declaring all their income in their tax return, then we’re going to be asking questions pretty quickly.”
Spending on thoroughbred horses above $65,000 could attract the attention of the ATO, as well as $150,000 on aircraft.
But if someone has made a genuine mistake, Mr Loh encouraged them to get in touch with the ATO, he added.
“With any of our data matching programs, you’ll always have the chance to respond to us before we initiate any compliance action,” he said.
“If people find they have made an error or omission they should get in touch with us as soon as possible. We may be able to significantly reduce penalties in circumstances where we are contacted before we begin any compliance activity.”
Data is collected from general and specialist insurers to help the ATO reviews of taxpayers where they suspect income has been under-declared or where capital gains tax has not been paid on the sale of certain assets, Mr Loh explained.
“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,” he said.
The information is also used to catch out taxpayers, who may be purchasing assets through their business without a connection to its activities. Instead they are applying those assets to the personal enjoyment of an associate or employee, giving rise to a fringe benefits tax liability, he added.
Self managed superannuation funds are also monitored to ensure that their trustee or beneficiaries are not acquiring lifestyle assets purely for personal use, news.com.au understands.
Taxpayers who are contacted by the ATO will be given the opportunity to verify the information they have collected before any compliance action is undertaken.
“They’ll be given at least 28 days to clarify information that has been obtained from the data providers. It is always better to be honest and let us know before we contact you,” Mr Loh said.