Now is the time to start thinking about any exposure you may have to Fringe Benefits Tax. You may think that all the great non-salary benefits you provide your most valued assets are either under that magical $300 or “otherwise deductible”? Well done.
However, there are always few tricks and traps when it comes to FBT. Let’s look at car fringe benefits.
Proving a motor vehicle can be quite costly in more ways than one! If you have an amount under motor vehicles expenses in your Company tax return 2017 (item 6 Label X), then you better make sure that you have all your FBT bases covered. The ATO data matching protocols are getting more and more thorough, and informing us that there is cross checking against motor vehicle registration in all States.
The other types of motor vehicles that get too frequently dismissed for FBT is the ute that is over 1 tonne. It is only exempt from FBT when private use is minor, irregular and infrequent. This “grey-area” has just received some clarify by the ATO with the issuing of PCG 2017/D14. Check that you comply as it will be on the ATO’s radar.
Remember you have two choices to calculate the FBT liability: Statutory formula or operating cost. The fault is the Stat formula, so if you wish to use the operating cost, then you HAVE to lodge an FBT return by lodgement date to elect to use this method. Otherwise you have defaulted into the Stat formula.
So, if your employee made contributions to reduce the taxable value of their car fringe benefit to nil, so no FBT is payable – did you use the operating cost? If so, you need to lodge a nil FBT return. Last year, Xero indicated that many of the FBT returns lodged with Xero Tax were nil returns. Better to be safe than sorry.
Just think if you get it wrong, you pay for the cost of the whole car within 5 years, then penalties and shortfall taxes increasing the error. If its a luxury car, no luxury car limit applies, making it even for costly.
If you need some guidance, please contact us to help out and provide some comfort over your FBT exposure.