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Car fringe benefits and your liabilities

Another Fringe Benefits Tax (FBT) year has ended and businesses are now getting their annual FBT returns lodged before the deadline.

Unfortunately, some grey areas remain on FBT for business tax payers, particularly in the situation where an employer fails to identify that a car fringe benefit has been provided to an employee.

One common situation where confusion arises is where a family-owned company or trustee purchases a car and provides it to one of the directors (who is still considered an employee) or an “associate” (such as their spouse) of the employer.

It is important to note that the ATO has data matching capabilities to identify and assess newly registered vehicles in the name of a company or a trustee where the vehicle is provided to employees.

Therefore, as an employer, it is important to identify if there are vehicles under a company or trustee’s name and whether these motor vehicles are provided for use in a personal capacity by employees or family members. The default statutory formula method will be used in calculating the employer’s FBT liability unless an appropriate log book is maintained in respect of each vehicle.

Should a company or trustee use the log book method to work out the costs of operating the car, they should ensure that the records are kept updated. The Tax Office are keen on reviewing log books for vehicles with high business use. If a business cannot provide a well-maintained log book, the ATO may require the use of the statutory formula method, which can result in an increased FBT liability.

If you need advice in relation to your record keeping requirements or wish to discuss the most cost-effective methods of dealing with fringe benefits, contact our tax accountants here.

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