ATO Asset Betterment Assessments.

With increasing data sharing between the ATO and financial institutions, default assessments are on the rise with an ATO focus on unexplained wealth.

Asset betterment is where the ATO compares the assets & liabilities of a taxpayer to their reported taxable transactions and identifies unexplained wealth.  The ATO can then issue a default assessment based on their assessment of what your income should have been.

If you need to challenge a default assessment, the taxpayer has the obligation to provide the burden of proof that the assessment was incorrect and/or the degree to which is was excessive and what the assessment should have been.

In the VTBL and Commission of Taxation AATA 168 case, the taxpayer appealed against a default assessment issued by the ATO in relation to apparently unexplained deposits in various bank accounts associated with her.  She was successful on some, but not all appeals.

Appeals against s.167 default assessments are usually unsuccessful, however in this case the taxpayer had reliable and significant records that showed the transactions genuinely related to other entities.

It is vitally important to keep up to date and sufficient documentation for any loans made or received and asset ownership information particularly where you are an individual trustee or director.

It is also important to ensure all company bank accounts are set up in the name of the company, trust or partnership and not in your individual name.  It is also prudent to provide the TFN of the entity to your bank for the bank accounts to assist in confirming who the bank account belongs to.