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The FBT year is coming to an end – be prepared

We understand that no one likes to pay tax and certainly no more tax than they should.  But very few people want to be on the wrong side of an Australian Tax Office (ATO) audit where fees and penalties are paid for neglecting your obligations.

The Fringe Benefits Tax (FBT) year ends on 31 March which means the ATO will be looking more closely at whether or not you as an employer should pay FBT and where they believe so, why didn’t you?

What do you need to do to be ready?

  1. Take odometer readings as at 31st March

If your business has cars, you should record odometer readings at the first and last days of the FBT year (31 March). We will send you a reminder to do so. It is as easy as to have your team take a photo on their phone and email it through to us with the car details.

  1. Keep a logbook

A log book must be kept for a continuous period of 12 weeks noting business use to calculate the percentage of expenses that can be claimed. It should include all these details as per the  ATO website.

The log book is valid for a period of five years unless there is a significant change in business use, at which point a new log book must be completed.

Note that it is not sufficient to estimate business use as the ATO have announced that if there is no log book, then you will have to use the statutory formula method whereby the private use of the vehicle is deemed to be 20{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} of the purchase price of the car (not car expenses) (incl GST).

Also, understand that travel from home to work is private unless your employer requires you to carry bulky equipment and you do so.

  1. After tax contribution

If you receive a contribution from an employee for the private use of the vehicle, your fringe benefits taxable value may be reduced to NIL in which case you don’t need to lodge an FBT return.

The FBT contributions still need to calculated correctly and reported in the employer’s tax return to ensure that this is in line with the ATO expectations.

We do these at year end on our client’s behalf.

  1. Beware of ATO audits

We have come across several FBT audits in the last couple of years and they are constantly increasing.

Datamatching has become more sophisticated over the years to the point where there are not many transactions businesses or individuals can make without the ATO knowing about it.  While the team at the ATO don’t go through data line by line they do look at anomalies.  The ATO now receive information directly from Department of Transport and Main Roads about any cars registered in the business and unless you pay FBT, they do come and ask questions.

The ATO audits may be costly as they are very detailed and quite often cover several years. This means that you not only have to do the right thing but also need to consider audit insurance which covers accountants or lawyers fees in case of an audit. Read more about audit shield HERE.

There are many other fringe benefits, with the most common being entertainment, car parking and interest free loans and if you wish to discuss them further, don’t hesitate to give us a call at 07 3160 7386.

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