ATO Lifestyle Asset Data-Matching Program: What Businesses Need to Know
The ATO has recently announced or extended a number of data-matching programs, including the lifestyle asset data-matching program. Under this program, data will be acquired from insurance providers for the 2023–24 to 2025–26 income years for specified classes of assets where the asset value meets or exceeds nominated thresholds.
Assets and Thresholds Covered by the Program
The lifestyle asset data-matching program applies to the following assets:
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Caravans and motorhomes with a value of $65,000 or more
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Motor vehicles, including cars, trucks and motorcycles, valued at $65,000 or more
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Thoroughbred horses valued at $65,000 or more
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Fine art valued at $100,000 or more per item
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Marine vessels valued at $100,000 or more
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Aircraft valued at $150,000 or more
ATO Objectives for the Data-Matching Program
The ATO has outlined several objectives for this program, including:
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Identifying compliance issues relating to income tax, capital gains tax (CGT), fringe benefits tax (FBT), goods and services tax (GST) and superannuation obligations
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Identifying and educating businesses that may not be meeting registration or lodgment requirements and assisting them to comply
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Ensuring businesses are meeting their tax and superannuation reporting obligations
Key Tax Risks the ATO Is Targeting
The ATO has identified several tax risks that are particularly relevant to businesses.
Income and Capital Gains Reporting
This includes the omission or incorrect reporting of income or capital gains, such as when taxpayers dispose of assets and fail to declare, or incorrectly declare, income or capital receipts arising from the disposal.
Incorrect GST Credit Claims
This risk arises where taxpayers purchase assets for personal use through their business and incorrectly claim GST credits they are not entitled to.
Fringe Benefits Tax Reporting Errors
FBT issues may arise where businesses purchase assets through the business and allow employees or associates to use those assets for personal enjoyment, giving rise to an FBT liability that is not correctly reported.
SMSF Asset Use Breaches
The ATO is also targeting situations where self-managed super funds acquire assets that are then applied for the present-day benefit of fund members or related parties, in breach of superannuation laws.
The ATO estimates that between 650,000 and 800,000 insurance policy records will be obtained each year, with between 250,000 and 350,000 matched records relating to individuals.
So What Does This Mean for Your Business?
While the data-matching program focuses on specific assets and thresholds, the ATO has noted that other assets and activities also attract scrutiny. These include holiday homes, sporting clubs and activities, grape growing and farming pursuits.
The ATO has observed that many businesses make common mistakes when accounting for assets that have both business and private use.
Common Asset-Related Errors
These mistakes include:
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Claiming deductions for business assets that are actually used solely for private purposes
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Incorrectly apportioning deductions between business use and private use of assets purchased by the business
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Creating an FBT liability by allowing business assets to be used by employees or associates for personal enjoyment
How Businesses Can Reduce Risk
Whether your business assets fall above or below the data-matching thresholds, you can reduce the risk of errors by following three key principles.
Review
Regularly review how your business assets are used and understand the split between business and private use where applicable. Deductions can only be claimed for the business use portion of an asset, so private use must be correctly identified and excluded. Remember that FBT liabilities may arise where assets are used by employees or associates for personal purposes.
Record
Maintain detailed and accurate records for all business transactions, including payments to and receipts from employees, shareholders and associates. Good record-keeping is essential to support income reporting, deductions and apportionment calculations.
Advise
If you engage a tax professional, ensure they are kept informed about how your business assets are being used. This allows them to correctly apportion income and deductions and help you stay on top of your tax, GST and FBT obligations.
Speak to one of our accountants if you have any questions about the changes in tax for 2024.
