Collectible car owners in the ATO's sights?

Anyone who has opened a bank account in recent years will tell you that it won't happen without a tax file number and adequate identification of the account holder.

That's a legislative requirement courtesy of the Australian Taxation Office (ATO) to reduce the tax-avoidance rorting that goes on with cash transactions. But the problem with quashing tax avoidance in one area is it inevitably transfers the rorting elsewhere.

It's not too surprising then that cars purchased with undeclared cash are another way to 'reward' someone for goods or services without informing the ATO. Moreover, if the vehicle owner is helping himself or herself to a 'fringe benefit' in the shape of a car, chances are that they're not squeaky clean in their other financial transactions either.

For the past couple of years, the ATO has acquired registration data from the state governments on vehicles valued at or above the former Luxury Car Tax threshold of $57,009. This year, the ATO (a federal government instrumentality) will request from the state registration authorities ownership data for vehicles purchased for as little as $10,000. The data applies to vehicles purchased during the 2007/08 financial year.

According to a 'data matching protocol' document issued by the ATO, the former Luxury Vehicle Data Matching Project will now be known as the Motor Vehicle Data Matching Project and will "capture lower valued vehicles that are increasingly provided as fringe benefits".

As far as the ATO is concerned, ownership of vehicles of a certain type and value are an indicator of "individuals who were either operating outside the tax system or were otherwise not complying with their taxation obligations".

Shades of Al Capone, the ATO could bring down some people who are guilty of acts a bit naughtier than just avoiding tax. Reading between the lines, even a $10,000 car represents a lot of cash handed over, so among the ATO's targets are perhaps those who make a living from providing buyers with illicit drugs.

It's singularly apparent that the registration data will highlight vehicle ownership by individuals who either haven't filed a recent tax return or have filed a bogus return. But as with any government initiative, there's a prospect of the net dragging in innocent parties as well as the bad guys.