ATO widens net to link lifestyle assets with underpayment of tax

Wealthy Australians who pretend to be poor but own valuable assets can soon expect a “please explain” from the tax office, which has them in its sights.

The tax office has widened its program to target wealthy Australians who pretend to be poor but own valuable assets such as yachts, fine art, thoroughbred horses, luxury cars and aircraft.

It has announced plans to trawl through more taxpayers’ insurance policies, siphoning out details of so-called “lifestyle assets”.

The Australian Taxation Office had already collected data from insurance policies for the 2014 and 2015 financial years, but will now be requesting policy information for the five years to 2020 from more than 30 insurance companies. It is part of a push by the taxman to recoup the full legal tax and superannuation liabilities owed by Australians. About 350,000 taxpayers are in the crosshairs.

The probe will help the agency find out who may be understating income, misreporting GST credits, or who has made capital gains when they have sold items without properly declaring them.

If you have an expensive boat but claim you’re on a minimum wage, expect a call from the tax office.

ATO deputy commissioner Deborah Jenkins said profiling taxpayers and cross-referencing details of assets such as art and yachts helped build a better financial profile of taxpayers than simply relying on tax returns.

“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a $3 million yacht, then this is likely to raise some red flags,” she said.

“Regardless of your level of wealth, we all need to pay the correct amount of tax and this data will allow us to ensure those people who can afford these kinds of items are doing the right thing, along with everyone else.

“Doing things like being untruthful about your income or failing to declare capital gains is effectively stealing from the community — and this is money the community is missing out on to pay for infrastructure and services we all rely on like schools, hospitals, and roads.”

If your car is worth more than $65,000, then the ATO is watching.

The ATO will get its hand on information relating to boats worth $100,000 or more, cars and horses worth $65,000 or more, fine art valued at $100,000 or more, and aircraft worth $150,000 or more.

The $65,000 base level for cars is less than the threshold for the luxury car tax, which is $67,525 this financial year.

Taxpayers who come clean before any ATO action can generally expect lower penalties and interest charges.

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“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,” Ms Jenkins said.

“If we discover incorrect GST input tax credit claims for items purchased for personal reasons, we’ll be following up and seeking full repayment on top of any applicable interest and penalties.”

According to the fifth annual report on corporate tax transparency, published last week, the ATO is drawing in an extra $7 billion a year in income tax after multinationals were forced to restructure their businesses in the wake of new avoidance laws implemented in 2016.

The Australian