The ATO has recently announced or extended several data-matching programs, including the lifestyle asset data-matching initiative. Data will be collected from insurance providers for the period from 2023-24 to 2025-26 concerning specified asset classes where the asset value meets or exceeds designated thresholds. The assets and their respective thresholds are as follows:

• 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

ATO Objectives

The ATO’s goals for this program include:

• Identifying compliance issues related to income tax, capital gains tax (CGT), fringe benefits tax (FBT), goods and services tax (GST), and super obligations.
• Identifying and educating businesses that may be failing to meet registration or lodgment requirements and assisting them in compliance.
• Ensuring businesses fulfill their tax and superannuation reporting obligations.

Tax Risks Addressed

The ATO aims to address several tax risks relevant to businesses, including:

• Omission or Incorrect Reporting of Income/Capital Gains: Taxpayers disposing of assets without declaring or incorrectly declaring income or capital receipts from the 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 buying assets through their business and allowing associates or employees to use them for personal enjoyment, leading to FBT liability.
• Use of Assets by Self-Managed Super Funds (SMSFs) in Breach of Law: SMSFs acquiring assets for the immediate benefit of the fund’s members or related parties.

The ATO estimates that it will obtain between 650,000 to 800,000 policy records annually, with 250,000 to 350,000 matching records concerning individuals.

Implications for Your Business

While the focus is on the specified assets and thresholds for the data-matching program, the ATO has indicated that additional asset types and activities (e.g., holiday homes, sporting clubs and activities, grape growing, and farming) may also attract scrutiny. Common mistakes made by businesses when accounting for mixed business and private use of an asset include:

• Claiming deductions for business assets solely used for private purposes.
• Incorrectly apportioning deductions between business and private use of assets purchased for the business.
• Creating an FBT liability for both the business and employee by allowing personal enjoyment of business assets.

How to Avoid Mistakes

Regardless of whether your business assets exceed the thresholds in the data-matching program, you can avoid these mistakes by:

1. Reviewing: Regularly assess how you treat your business’s assets and understand the balance between business and private usage. Remember, deductions can only be claimed against business income for expenses related to business use of your assets, so it’s essential to apportion private use and exclude it from calculations. Also, be aware that an FBT liability can arise for both the business and employees if assets are used for personal purposes.
2. Recording: Maintain detailed records of all business transactions, including payments to and receipts from employees, shareholders, and associates.
3. Advising: If you work with a tax professional for managing your tax affairs, keep them informed about how you use your business assets. This will help them correctly apportion relevant income and deductions and ensure you stay compliant with your tax obligations.