The ATO has obtained data from 25 insurance companies regarding the insured assets of taxpayers. Why have the ATO obtained this information and what are they looking to gain from it?
Essentially the ATO are looking to achieve two outcomes:
- Identify taxpayers who are operating outside the taxation system; and
- Identify taxpayers who are not fully declaring all their capital gains.
The first goal is to track those taxpayers who have accumulated significant assets (as listed on their insurance policies) but have never declared any substantial taxable income. It’s a data-matching program designed to catch those taxpayers deliberately doing the wrong thing and operating in the black economy.
The second goal is to identify assets, which taxpayers may not have realized were taxable if sold for a profit.
So what does the ATO think you have not reported a Capital Gain on?
In addition to well-known assets such as real estate and shares, there are two other categories of CGT assets, which are less well known – collectables and personal use assets.
Collectables that you purchased for more than $500
What exactly is a collectable?
- paintings, sculptures, drawings, engravings or photographs; reproductions of these items; or property of a similar description or use
- coins or medallions
- rare folios, manuscripts or books
- postage stamps or first day covers.
For example if you purchased a Scott Christensen painting when he was just starting out for $550 and now you are now considering selling it for a few thousand – unfortunately that gain is taxable! If you are of a philanthropist bent, you could also consider donating the artwork under the Cultural Gifts Program to claim a tax deduction for a few thousand instead.
Note, it is only items, which you have purchased for more than $500 that attract tax if they are sold for a profit
Personal use assets acquired for more than $10,000
What exactly is a personal use asset? Well it is just about anything that you own which is kept mainly for the personal use or enjoyment for you or your family. It includes:
- electrical goods
- household items
Mostly these items only ever create a capital loss – as the items lose value over time instead of gaining in value. However, the ATO does not let you claim these capital losses against capital gains on other types of assets. But you might have an unusual situation where you do make a capital gain on a personal use asset. For example if you purchased a $30,000 yacht but while it was being sailed over to Australia it sank and your insurance payout was $50,000; then have realized a $20,000 taxable capital gain.
Note, it is only personal use items which you have purchased for more than $10,000 that attract tax if they are sold for a profit.