The Fringe Benefits Tax (FBT) year has recently ended (31st March 2010) and returns are, generally, due for lodgment by the 21st May 2010. With the ATO flagging their intention to increase their audit activity in this area, now is the time to reconsider if your business has a FBT liability that is not being disclosed. If you would like to discuss in more detail or register your business for FBT, please do not hesitate to contact a member of our team.

The Australian Taxation Office (ATO) has issued their 2010 Compliance Program and highlighted that they are concerned with the compliance issues relating to Fringe Benefits Tax. In response to this they have flagged that they will be undertaking 650 Reviews and 360 Audits . Furthermore, they will be contacting 2,000 small to medium enterprises (SME’s) for verification relating to FBT compliance.

Motor Vehicle fringe benefits make up the majority of FBT paid by employers. This is central to the ATO now targeting this area to determine whether SME’s are correctly complying with ATO regulations.

The following are some ways in which the ATO is gathering information relating to motor vehicle fringe benefits:
» Data from state motor registrations bodies
» Salary packaging organisations
» Fleet providers
» Motor vehicle dealers (in particular luxury vehicles, utes and twin cabs)

The compliance program aims to:
» Identify non declaration of car benefits
» Ensure correct application of motor vehicle exemption
» Ensure correct valuation of motor vehicles

It is important for anyone using the statutory method to calculate fringe benefits relating to motor vehicles to ensure they record their odometer reading at the 31st March each year. This will assist with determining the appropriate statutory fraction to apply against the cost base (or reduced cost base) of the vehicle.

Alternatively, when using the operating cost method, you must ensure you have a valid log book to apply against the expenses for the year. Failure to maintain a valid log book will result in 100% private use deemed for the company motor vehicle leaving only the statutory method as a viable option for calculating the value of the fringe benefit.

When determining the fringe benefit amount each year it is important to have both options available as the optimal result may change depending on the extent of both actual (fuel, registration, repairs) and deemed (depreciation, interest) expenses incurred.