Division 7A Mess Up Series – Part Three: Division 7A and Private Use of Property & Luxury Goods

Division 7A has all sorts of ways of being triggered and one of the ways is the private use of property and luxury goods.

Broadly, the simple scenario is where a company owns a house, car or boat and a family member uses that house, car or boat for private use without paying a market fee to the company for use. Each time the house, car or boat is used a “payment” is triggered and attracts Division 7A attention.

Sometimes overlooked are the more complex scenarios which involve private use of such assets like a house, car or boat owned by a trust which has a loan or unpaid present entitlement to a company. Depending on the specific circumstances, it is possible for Division 7A to rear its ugly head.

What’s of particular note in recent years and will continue to be so in the future is that the ATO has extended its data matching program to capture more details of luxury goods. For instance, the ATO has been acquiring data from insurance policies about taxpayers who own high value:

  • boats and other marine vessels;
  • horses;
  • fine art;
  • motor vehicles; and

(The ATO already has extensive data matching for real estate.)

The ATO could datamine this information to identify possible contraventions of Division 7A.

Accordingly, if you are using houses, boats, cars, art, etc which are owned by a company or trust it is prudent to consider Division 7A to avoid its severe tax application.

If you’ve encountered any of these issues or are concerned about how your accountant has handled your Division 7A compliance, then give either Mike Beer or Ben Paul a call to obtain the specialist Division 7A help you need.

This has been Part Three of our Division 7A Mess Up series.

Part OnePart Two and Part Four are available on our website.

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