An area of increased audit by the ATO is that of the provision of motor vehicles by businesses. The big concern for the ATO is that no Fringe benefit is being paid on this benefit being provided.
How will the ATO target employers who are less likely to comply with FBT rules?
The ATO stated that it would embark on a data matching program, using third party information to identify those outside the FBT system. (August 2013 FBT sub-committee meeting minutes)
It is likely that the ATO will approach State Registration authorities to identify vehicles which are registered in a business or employer’s name and don’t have an FBT return lodged.
The ATO has recognised that there are inherent weaknesses in this approach
The ATO anticipates that a large number of small to medium sized businesses will be identified as having failed to lodge an FBT return despite having provided car fringe benefits to employees.
The ATO will collect data from tax returns lodged which disclose motor vehicle expenses for a business and fringe benefits paid as a reporting requirement.
What is a car fringe benefit?
A car fringe benefit most commonly arises when an employer provides or makes available a car that they own or lease for the private use of an employee or their associate (e.g. spouse) during the year. Cars are ‘made available’ to an employee/associate when the car is not at the employer’s premises & the employee is allowed to use it for private purposes. All employers should note that a car is deemed to be ‘made available’ for an employee’s private use when the car is garaged at an employee’s home (regardless of whether they only use it for business purposes). No FBT however is payable for travel where all of the following conditions are met:
A work-related car is provided;
The car is used for work-related travel; &
There is minimal private usage of the car (the Tax Office cites an example of occasional use of the vehicle to remove domestic rubbish).
‘Cars’ include wagons, panel vans & utilities (except for those panel vans & utilities designed to carry a load of one tonne or more).
Please note however, many employers believe if the provide employees a vehicle that is exempt for FBT purposes then no FBT is payable regardless. This however is not 100% correct. Yes it does not trigger a car fringe benefit but it may give rise to a residual fringe benefit.
If your business does provide motor vehicles to employees it is important that any FBT requirements are reviewed and logbooks are up to date. Please contact us for a review.