top of page
Search

Navigating FBT: ATO Crackdown on Car Fringe Benefits

With the Fringe Benefits Tax (FBT) year just ending on March 31, the ATO has shed light on frequent mistakes that are catching their attention. Jennifer Madigan, director of FBT risk and governance for the ATO, recently shared insights into the Tax Office's compliance approach for this year.

 

Vehicle-Related Errors: A Major Concern

 

One of the most prevalent issues revolves around motor vehicles, a common employee incentive. Employers often stumble when it comes to correctly classifying vehicles, which can lead to FBT calculation errors.

 

Vehicle Categories:


  1. Cars designed for fewer than nine passengers (including the driver) – most passenger vehicles

  2. Vehicles not designed for passengers, but with a carrying capacity under one tonne - e.g. most dual cab utes

  3. Other vehicles with a carrying capacity over one tonne - not classified as cars, but still subject to fringe benefits

 

It's crucial to note that the vehicle type affects the FBT calculation method and potential exemptions.

 

Private vs. Business Use: A Fine Line

 

A frequent mistake is the misclassification of an employee's private vehicle use as business use.

Madigan offers a simple test: "If the employee had paid for the cost of using the car, could they have claimed an income tax deduction themselves?"

 

Examples of Private Use:

  • Commuting between home and work

  • Lunch trips

  • School pick-ups

  • Holiday trips

  • Weekend travel

 

While some exemptions exist, these trips are generally considered private and subject to FBT.

 

Log Book Pitfalls

 

The ATO continues to observe numerous errors in log book maintenance. A compliant log book should include:

 

  • Journey start and end dates

  • Odometer readings

  • Kilometres travelled

  • Detailed purpose of the journey

 

Common log book issues include:


  • Insufficient journey purpose details (simply stating "business" is inadequate)

  • Discrepancies between log entries and other records

  • Impractical or unexplainable entries

  • Unrepresentative usage records

  • Combining business and private travel in single entries

 

Consequences of Non - Compliance

 

Mistakes in log bookkeeping can lead to serious consequences:

 

  • The ATO may deem the log book invalid

  • Business use percentage might be reduced to zero

  • Default statutory formula method may be applied

  • Higher FBT liability for the employer

 

ATO's Four - Step Compliance Guide

 

To avoid these pitfalls, follow the ATO's four key steps:

 

  1. Identify Benefits: Recognize the types of benefits provided and understand their specific valuation methods and record-keeping requirements.

     

  2. Determine Taxable Value: Calculate the taxable value for each benefit using the appropriate method.

     

  3. Lodge and Pay: Submit your FBT return, report fringe benefits on employee payment summaries or through single touch payroll, and pay any FBT owed by the due date.

     

  4. Keep Records: Maintain and retain all necessary records as per ATO guidelines.

 

By adhering to these steps and avoiding common errors, employers can ensure FBT compliance and minimise the risk of unexpected tax liabilities. As the March 31 deadline is now here, it's time to review your FBT practices and make any necessary adjustments.


If you have any questions please contact your Client Manager for more information.

 

 

 
 
 

Comments

bottom of page