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ATO Audits

Let’s Talk FBT with the ATO – webinar recording available

ATO Audits, ATO Data Matching, Australian Taxation Office, Employer Obligations, Exempt Cars, FBT Returns, Logbook, Payment Summary, Salary Packaging, Training & Seminars
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I recently hosted a webinar “Let’s Talk FBT with the ATO” – in this webinar the ATO provided insight to their approach to FBT, ranging from helping employers through to common mistakes and misunderstandings.
If your new to FBT (or a bit stale on the latest FBT rules) or not sure about your own FBT obligations or your clients FBT obligations, I highly recommend you invest the time (90 minutes) to watch this webinar recording – it’s free. (Link to recording is below.)
A big thank you to Jennifer Madigan and her team from the ATO for an insightful and well received FBT presentation.

Please copy the following link to your browser to access the recording:  https://attendee.gotowebinar.com/recording/6113213623244542722

Motor vehicles – ATO seeing a significant level of non-compliance

ATO Audits, ATO Data Matching, Australian Taxation Office, Cars and FBT, Employer Obligations, FBT Returns, Logbook, Record Keeping
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If there was any doubt that Motor Vehicles is the biggest issue, the ATO have confirmed their concerns and provide examples where based on ATO data and risk models, they will select an employer for a FBT car review to check if the company is meeting its FBT obligations.

Motor vehicles

We see a significant level of non-compliance in situations where an employer provides a motor vehicle to an employee (or their associate) for their private travel or makes it available to use privately.

Situations that concern us include when employers:

  • treat cars as 100% business use, even though they are used or available for private purposes
  • don’t have a valid log book, or the log book is not a representative sample of actual travel
  • treat all eligible commercial vehicles as FBT exempt, without considering if the private use of the vehicle was limited.

ATO Example One: identifying private use

Eve is the owner and sole director of a company, Eve’s Consultancy Business Pty Ltd (ECB). Eve arranges for ECB to purchase a car, which she uses to visit clients and for other work-related travel.

Eve considers the car to be a business car because it is owned by the company and has a sign on the side with the business name. Therefore, ECB does not keep a log book and does not lodge an FBT return.

Based on our data and risk models, we select ECB for an FBT car review to check if the company is meeting its FBT obligations.

During the review, Eve explains that the car is garaged at her home and she uses it for her daily commute to the office.

We advise Eve that:

  • home to work travel is private use
  • when a car is garaged at an employee’s home (as a director of ECB, Eve is considered an employee for FBT purposes), the car is considered to be available for their private use
  • in both instances a car fringe benefit has been provided and FBT applies.

We provide Eve with information about how to calculate FBT using the statutory formula method (she can’t use the operating cost method because there is no log book). She agrees to lodge an FBT return for ECB.

ATO Example Two: limited private use of eligible vehicles

BTE is an engineering business. It has a fleet of dual cab utes (with a carrying capacity of less than 1 tonne) and sedans, which its employees use to attend business sites and visit clients.

BTE considers that FBT doesn’t apply to the vehicles because the utes are eligible commercial vehicles and the sedans are only used for business purposes. Therefore, BTE does not lodge an FBT return.

Based on our data and risk models, we select BTE for an FBT car review to check if the business is meeting its FBT obligations.

The review identifies that the sedans remain at the office and the utes are taken home by employees and used for private purposes (such as weekend sport and camping trips).

We advise BTE that the private use of the utes must be limited to be an exempt benefit (see PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles). The utes were used for extensive private purposes therefore these conditions have not been met. In this situation a car fringe benefit has been provided and FBT applies.

We provide BTE with information about how to calculate FBT. The business lodges an FBT return.

 

2023 is the year to add “FBT Service Line” to your services and clients offerings…

ATO Audits, ATO Data Matching, Australian Taxation Office, Employer Obligations, Training & Seminars
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Now is the right time

There has never been a better time to engage with your clients (and new clients) in relation to FBT. The ATO want Tax Practitioners to engage with their clients on FBT.

Some startling facts that highlight the risk for Small Business Employers – and the opportunity for Tax Practitioners:

  • There are 900,000 active employers in Australia – 80% have tax practitioners, 12% (108,000) are registered for FBT, 50% (54,000) are small business
  • 180,000 active employers are not supported by a tax practitioner
  • 792,000 active employers are not FBT registered – most, if not all, are small business – failure to register means there is no ATO FBT audit time limit

The facts don’t lie. The ATO want to remove the registration / compliance blockers that exist for Small Business Employers and their Tax Practitioners.

When an Employer owns or leases, even a small number of motor vehicles (and has not considered FBT previously), the FBT liability exposure can quickly run in to tens of thousands dollars or even hundreds of thousands dollars over multiple FBT years – plus penalties, interest and FTL. We are seeing ATO FBT Auditors requiring FBT Returns to be lodged going back 3 to 4 years.

Find out more about getting your “Practice Certificate in FBT Services” (“PC in FBT”) by clicking here:  PRACTICE CERTIFICATE IN FBT SERVICES

Meal Entertainment v Sustenance – ATO acknowledge the challenge

ATO Audits, Australian Taxation Office, Employer Elections & Declarations, Employer Obligations, Entertainment Expenses, Exempt Benefits, Exempt Cars, FBT Concessions, FBT Events, FBT Returns, Not for profits, Rebateable Employers, Record Keeping, Relocations, Remote Area Benefits, Salary Packaging, Wine
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  • The distinction between entertainment and sustenance, and application of exemptions such as the minor benefit exemption are the most common issues encountered with respect to entertainment
  • Many employers are uncertain as to what is considered to be infrequent and irregular, and what is a reasonable total value of associated benefits, incurring high cost of compliance
  • The ATO acknowledge the above concerns and recognise there are challenges

These are key areas in FBT Compliance and will be discussed in our 2023 FBT Workshops: https://fbtsolutions.com.au/fbt-return-preparation-full-day-workshops/

To help you get ready for FBT 2023 we are running 8 full day Face to Face FBT Workshops and 2 full day Online Workshops across the country in February and March 2023. Here is the full list of locations and dates:

ONLINE: Tuesday 21 February 2023
Sydney: Wednesday 1 March 2023, Hilton Hotel – 488 George Street
Parramatta: Friday 3 March 2023, Novotel – 350 Church Street
Canberra: Thursday 9 March 2023, Novotel – 65 Northbourne Ave
Brisbane: Tuesday 14 March 2023, Hilton Hotel – 190 Elizabeth Street
Melbourne: Thursday 16 March 2023 Marriott Hotel – Corner Exhibition &, Lonsdale Streets
Perth: Tuesday 21 March 2023, Parmelia Hilton Hotel – 14 Mill Street
Adelaide: Thursday 23 March 2023, Hilton Hotel – 233 Victoria Square
Sydney: Tuesday 28 March 2023, Hilton Hotel – 488 George Street
ONLINE: Thursday 30 March 2023

The ATO do not conduct FBT Audits. True or False?

ATO Audits, Australian Taxation Office, Employer Obligations, FBT Returns, Uncategorized
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One of the topics we discussed in the August LET’S TALK FBT & SALARY PACKAGING webinar was ATO focus on Small Business, their Tax Agents, and FBT Audit activity.

Here is a link to the webinar recording: Let’s Talk FBT & Salary Packaging

I wanted to share with you important information to provide “real life” context to the topic. Whilst many people believe that the ATO do not conduct FBT audits – this is a very old myth. The ATO are actively conducting FBT Audits.

Who do the ATO select for an FBT Audit?

Here are some common examples of businesses that are selected for FBT Audit, including:

  1. Businesses with one or more registered motor vehicles
  2. Businesses who are not registered for FBT
  3. Businesses who have not lodged FBT returns
  4. Businesses who have not declared employee contributions in their income tax returns
  5. Businesses who have not remitted GST on employee contributions in their BAS

What information do the ATO require for the FBT Audit?

The ATO information request for an FBT Audit can be extensive. Some of the information requested is often not even directly related to FBT. Examples of the information requested by the ATO for an FBT Audit, includes:

  1. Reason why you have not lodged FBT returns
  2. Financial Statements
  3. Detailed tax reconciliation of accounting profit to taxable income
  4. Depreciation schedule and calculations for motor vehicles
  5. Motor vehicle information including purchase invoices, leasing documentation, service records, logbook records, odometer records including opening and closing odometer records for each FBT year, driver name, address where the motor vehicle is normally garaged, sale date and sale information if relevant
  6. Details of employee contributions including journal entries and general ledger accounts
  7. Details of GST remitted on employee contributions

To download the sample ATO FBT Audit letter, please click here: Sample ATO FBT audit letter

To download the  ATO FBT Checklist, please click here: Sample ATO FBT audit letter