Do you have a fancy boat? Make sure it all adds up!
ATO targets ‘lifestyle’ assets
The ATO has requested insurance policy information from 30 insurers for lifestyle assets such as yachts, thoroughbred horses, and fine arts.
The review, expected to impact 350,000 taxpayers, reaches from the 2015-16 to 2019-20 financial years, revealing assets that previously may not have been disclosed or underreporting of income. “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,” Deputy Commissioner Deborah Jenkins said.
The ATO is looking for:
under-reporting of income and mismatches between lifestyle assets and reported income,
the purchase of assets in a company name but where those assets are used for private purposes (incorrect claims or non-reporting of GST credits, FBT, Division 7A, capital gains tax), and
lifestyle assets purchased by self-managed superannuation funds that might breach the sole purpose test.
Insurers are required to provide the ATO with policy information where the value of assets is equal to or exceeds the following thresholds:
Marine vessels $100,000
Motor vehicles $65,000
Thoroughbred horses $65,000
Fine art $100,000 per item
Aircraft $150,000
The ATO has stated that the data matching will not result in automatic audits but will be reviewed by compliance officers to support the profiling of selected taxpayers.
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 me to discuss your individual circumstances.
CGT and the family home: expats and foreigners excluded from tax exemption
Late last year, legislative changes were made to the application of Capital Gains Tax (CGT) that exclude non-residents from accessing the main residence exemption. The retrospective changes directly impact foreigners and expats whose main residence is in Australia or overseas.
Key points
Non-residents for tax purposes excluded from the main residence exemption from 9 May 2017
Transitional rules allow non-residents to sell their property and access the main residence exemption under the previous rules (if they held the property continuously from 9 May 2017).
An exclusion applies where the taxpayer has been a non-resident for 6 years or less and a ‘life event’ occurs, such as divorce, death or terminal illness.
The transitional rules until 30 June 2020
Transitional rules are in place for non-resident taxpayers who would have been able to access the main residence exemption prior to the changes. The transitional rules enable someone who held property continuously from 9 May 2017 to apply the existing rules if the CGT event occurs on or before 30 June 2020. This gives non-residents a limited period of time to sell their property and obtain some tax relief under the main residence rules.
The new rules do not impact on Australian tax residents.
Previously, the main residence exemption was available to individuals who were residents, non-residents, and temporary residents for tax purposes. The residency tests can be confusing. If you are uncertain, you should seek advice to clarify your position.
If you think this may impact you, please contact us for specific advice as soon as possible and well before the transitional rules end date of 30 June 2020.
Alerts to protect SMSFs from fraud
A new system alerting SMSF trustees of changes made to their SMSF will roll out this month. The ATO will alert trustees by text and/or email when changes are made to bank details, electronic service address of the fund, the authorised contact and members.
Trustees need to notify the ATO within 28 days of key changes to the fund including a change in trustees, directors of the corporate trustee, members, contact details, address and fund status.
Disclosure of business tax debts
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:
are registered in the Australian Business Register and are not a complying superannuation fund, a DGR, registered charity or government entity; and
have one or more tax debts totalling at least $100,000 that are overdue for more than 90 days, but not:
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.
MYEFO – 2019/20
Treasury has released its Mid-Year Economic and Fiscal Outlook (‘MYEFO’) for 2019/20 forecasting a surplus of approximately $5 billion.
Proposed new record-keeping course
One new tax-related measure of note in the MYEFO was the announcement the ATO would be provided with a new discretion to direct taxpayers (found to be lacking in their substantiation efforts under audit) to undertake an approved record-keeping course, instead of applying financial penalties.
This is yet another measure designed to tackle the ‘black’ or ‘cash’ economy.
Specifically, the Commissioner will be given the discretion to direct taxpayers to undertake the course where he reasonably believes there has been a failure by the taxpayer to comply with their reporting obligations.
The Commissioner will not apply this discretion to those who disengage with the tax system or who deliberately avoid their record-keeping obligations.
New ‘gig’ economy reporting
Additionally, the MYEFO also announced the Government’s intention to implement a new third party reporting regime for the sharing economy.
This will apply to businesses who operate via online platforms within the ‘sharing’ or ‘gig’ economy (e.g., Uber and Airbnb).
It is proposed to be introduced in two stages, starting from 1 July 2022 (for ride-sharing and accommodation platforms) and from 1 July 2023 (for asset sharing, food delivery and tasking-based platforms).
The online platforms will be required to report identification and income information for all its participating members (i.e., both the sellers and providers).
These reports will go directly to the ATO for data-matching (i.e., review and audit) purposes.
Quote of the month:
“Courage is grace under pressure.”
~ Ernest Hemingway
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, give Adrian and the team @ Clear Accounting Solutions a call.