The provision of cars by employers to employees remains an issue that continues to create confusion for some business taxpayers.
A not-uncommon situation is where the employer fails to identify that a car fringe benefit has been provided. This is typically found in family companies or trusts where a car bought by the business is provided to one of the owners who is also an employee (or that person’s “associate” — say a spouse or child). Remember, a director is still considered an employee.
The ATO in the past has undertaken data matching activities with state base road registration authorities to identify newly registered vehicles under a company or trustee’s name and issue amended assessments where the car has been provided to an employee (or an associate of the employee). The default statutory formula would be adopted in calculating the resulting FBT liability (contact us for more information). This could be costly where the car is considered a luxury motor vehicle. It is therefore important to identify whether there are any vehicles held by a business and whether they are provided for use in the personal capacity of any employee or their family members.
Another issue that can present problems with respect to car fringe benefits is whether valid log books have been properly maintained (where the employer has relied on the log book method in valuing benefits). Again, this is most relevant for family businesses where record keeping may not be up to scratch.
The ATO is reviewing log books being maintained for vehicles where there has been a high business use percentage. If you have adopted such an approach, it’s important that you maintain and keep the appropriate log books. Failure to do so could result in the default statutory formula method being required by the ATO to be used, which will ultimately give rise to a higher FBT bill.
If you have any questions in relation to the ATO’s recent activities, please contact Taxwise on 08 9248 9124.
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