The ATO has recently advised that it will be contacting taxpayers (and tax agents on behalf of their clients) that have been identified as having cars registered in their business name who have not lodged an FBT return.
The ATO has reminded businesses that:
– a car fringe benefit will occur when a business owns or leases a car and makes it available for an employee’s private travel or use (including garaging the car at or near an employee’s home and making it available for private use); and that
– business directors are also ’employees’ for FBT purposes.
Now this really isn’t anything new, the ATO have been checking up on business cars for quite some time now. The fact that they are making it public means that the audits are going happen more often.
What does that mean for you?
There is no need to panic, you just need to ensure that:
1. You have a valid logbook. You are required to keep one for a continuous period of 12 weeks to work out your private use percentage and then you can use it for 5 years unless your circumstances change dramatically.
2. Keep in mind, that if the car has been purchased & registered in your business entity, the ATO will get this information directly from Department of Transport.
3. You need to work out the private use component of all the car expenses, including deemed interest and depreciation and:
- either lodge FBT return and pay fringe benefits tax
- OR make a contribution to compensate the business for the private use. For most family businesses we favour this option as it is more tax efficient and cost effective.
Also, the trick is to disclose this FBT contribution in business tax return correctly, otherwise the ATO will not know that this has been done and tag you for audit anyway.
4. Make sure you have audit insurance. Unfortunately, it is not enough to do the right thing. When it comes to the ATO audit, it is on you to prove that you have done everything right, which in some cases may be time consuming and therefore costly. Audit insurance will cover the cost of your accountants or solicitors dealing with the ATO on your behalf.
If you need more information, don’t hesitate to get in touch.
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