The tax office will begin to scrutinise the sale of cars worth over $10,000 in an attempt to crack down on businesses failing to comply with fringe benefits and capital gains tax obligations.
While the tax office has previously investigated car sales worth over $57,000, it will now look at about 1.7 million car sales recorded during the 2007-08 financial year.
As well as trying to find tax cheats who have tried to hide their income, the tax office says it will also be targeting businesses that provide cars to employees but do not comply with fringe benefits regulations.
“The purpose of the data matching program is to ensure people are correctly declaring income and meeting their tax obligations,” the tax office says.
“Lower valued vehicles are increasingly being provided as fringe benefits, and the tax office has lowered the threshold of data being collected from previous years to assist in helping people understand and meet their fringe benefits tax obligations as well as other tax obligations.”
The tax office has been ramping up its investigations of car sales since last year when it announced it would investigate individuals who own luxury cars but have low income levels.
Michael Dirkis from the Taxation Institute of Australia says the tax office has been ramping up its data matching investigations because it has delivered rewards.
“For a long time the ATO hasn’t had the capacity to get that level of data from various estate agencies, and now they do and they’re making an attempt to take advantage of that,” he says.
“Certainly from what we’ve heard, the process has been quite lucrative because people forget they’ve had a transaction and don’t realise these gains from car sales may be subject to tax.”
Taxation assistant commissioner Greg Topping told The Age that in about 70% of cases in car sales investigations there is a liability that hasn’t been acknowledged by the taxpayer.
Dirkis says that the investigations are part of the “so-called black economy”, and that individuals and businesses need to be aware of when their “hobby” turns into a business in its own right. “If you’re turning over 50 cars in a year, it’s hard to say it’s a hobby.
“Businesses should be talking to advisers and say ‘we’ve been engaged in this’ and ask about their circumstances and liabilities. For other people it’s an issue of saying ‘have I overstepped the mark?’”
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
