ATO scrutinising novated leases
• Data Matching, novated lease,
The ATO will once again be running its data matching program on novated leases in 2024, covering the 2023–2024 to 2025–2026 income years. This program first commenced in 2021, collecting data from the 2018–2019 income year. In the latest iteration of the program, it’s estimated that approximately 240,000 individuals will be affected each financial year, and the data matching will allow the ATO to identify and address taxation risks such as employers claiming GST credits incorrectly for paying the GST on the purchase of a vehicle, risks related to FBT compliance, and employees incorrectly claiming motor vehicle related tax deductions.
The ATO has released details of one of its first data matching programs for 2024, on novated leases. According to the ATO, this type of program has been running since June 2021 and has broadly achieved its goals in the previous years by identifying candidates for review and audit in terms of registration of lodgment obligations.
For the current program, which will cover the 2023–2024 to 2025–2026 income years, novated lease data will be collected from various fleet and leasing groups, including McMillian Shakespeare Group, Smartgroup Corporation, SG Fleet Group, Eclipx Group, LeasePlan, Toyota Fleet Management, LeasePLUS and Orix Australia.
Specifically, the data items collected from providers will consist of:
- lessee/employee identification details – unique identifier, name, addresses, date of birth, contact numbers and email addresses;
- employer identifying details – unique identifier, trading/legal name of employer, Australian business number (ABN), addresses, contact name, contact number and email addresses; and
- lease transaction details – identifier for lease transaction, lease start/end/expected end date, lease termination date, number plate of the vehicle, type of vehicle (new or used), category of vehicle (sedan, wagon, utility, etc), lease price per month including GST, items packaged with the vehicle lease, expenses packaged with the vehicle lease (fuel, servicing, etc), bank account details for the lessee (name, account number, BSB, etc).
It is estimated that 240,000 individuals will be affected by the latest data matching program each financial year. The ATO notes that the program will allow it to identify and address taxation risks such as employers claiming GST credits incorrectly for paying the GST on the purchase of a vehicle, risks related to FBT compliance, and employees incorrectly claiming motor vehicle related tax deductions.
The data from this type of program is also used by the ATO to provide tailored advice and guidance through online messaging prompts when people are completing their tax return; for novated leases data matching specifically, this relates to labels D1 (work-related car expenses) and D2 (work-related travel expenses). Messaging will appear for taxpayers identified in the prior financial year’s data matching, and will inform the taxpayer that motor vehicle expenses under a novated lease arrangement are not tax-deductible.
In addition, after lodgment, the data will be used by the ATO for targeted prompter campaigns to capture any taxpayers with novated leases who have claimed work-related expenses on their tax returns. According to the ATO, in 2022 its “low touch” prevention strategy for taxpayers with novated leases resulted in a net decrease in the number of claims at label D1 of individual returns by 41% in self-preparers and by 17% in clients of tax agents, compared to the control group.
The data will be collected annually by the ATO, usually following the end of each March; however, it will also collect data periodically due to the large number of providers currently in the program. The collected data will be retained for five years from receipt of the final instalment of verified data files from the providers. The ATO notes that this five-year period is required, as discrepancy matching requires the comparison of subsequent lodgments against the data extending over multiple financial years.