Financial Planning

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The ATO has announced or extended a number of data-matching programs recently, including the lifestyle asset data-matching program. Data will be acquired from insurance providers for 2023-24 to 2025-26 for specified classes of asset where the asset value is equal to or exceeds nominated thresholds

The assets and thresholds covered are:

• caravans/motorhomes - $65,000;

• motor vehicles including cars, trucks and motorcycles - $65,000;

• thoroughbred horses - $65,000;

• fine art - $100,000 per item;

• marine vessels - $100,000;

• aircraft - $150,000.

The ATO's objectives for the program include:

• identifying compliance issues with income tax, capital gains tax (CGT), fringe benefits tax (FBT), goods and services tax (GST) and super obligations;

• identifying and educating businesses that might be failing to meet registration or lodgment obligations and help them comply;

• ensure businesses are meeting their tax and super reporting obligations.

Some of the tax risks that the ATO is keen to address that are relevant to businesses are the:

• omission or incorrect reporting of income and/or capital gain - taxpayers disposing of assets and not declaring or incorrectly declaring income and/or capital receipts on disposal;

• incorrect claiming of GST credits - taxpayers purchasing personal use assets through their business and claiming GST credits they are not entitled to;

• omitted or incorrect reporting of FBT - taxpayers purchasing assets through their business and allowing associates or employees to use for personal enjoyment giving rise to an FBT liability;

• use of assets by self-managed super funds (SMSFs) in breach of the law - SMSFs acquiring assets and applying them for the present-day benefit of the fund's members or related parties.

The ATO estimates that between 650,000 to 800,000 policy records will be obtained each year, with 250,000 to 350,000 matched records relating to individuals.

So what does this mean for your business?

While the focus is on the above assets and thresholds for the data-matching program, the ATO has also noted that additional types of assets and activities also attract their scrutiny (eg, holiday homes, sporting clubs and activities, grape growing and farming pursuits). The ATO has found that some businesses make a number of common mistakes when accounting for the mixed business and private use of an asset, such as:

• claiming deductions for business assets that are then solely used for private purposes;

• incorrectly apportioning deductions between the business use and private use of an asset purchased by the business;

• creating an FBT liability for both the business and employee by using a business asset for personal enjoyment purposes.

Whether your business assets are above or below the thresholds in the data-matching program, you can avoid making these mistakes if you:

Review - Regularly review the way you treat your business's assets and understand the mix between business and private usage where applicable. Remember, you can only claim deductions against business income for expenses associated with business use of your assets so you will need to be able to apportion the private use of an asset and exclude that from your calculations. Also remember that an FBT liability can arise for the business and your employee if you have assets that are used by an employee or an associate for personal purposes, and that needs to be accounted for.

Record - Keep detailed records from your business that cover all transactions, including payments to and receipts from employees, shareholders and associates.

Advise - If you use a tax professional in the management of your tax affairs, keep them up to date on how you're using your business assets so they can correctly apportion relevant income and deductions, and stay on top of your tax obligations.