With the start of the Fringe Benefits Tax year looming on 1 April, businesses are being urged to review their Fringe Benefits Tax (FBT) position.
The ATO’s top FBT problem areas
|
FBT liabilities can trap unwary businesses, some of whom don’t recognise that there can be a tax consequence from providing benefits to staff such as entertainment.
It is important to understand there can be implications from seemingly straight-forward business activities across income tax and GST,
as well as FBT.
For some smaller businesses, it can come as a surprise that business related activities can fall within the FBT system. While there are some
exemptions in place, businesses need a clear understanding that many benefits could come under the scrutiny of the Australian Taxation
Office (ATO).
A small business owner might think it appropriate to take a good customer or supplier to lunch. It might also seem natural to take along a
staff member to that lunch. But there could be an FBT liability that arises depending on the value of the food and drink on a per head basis
and how frequently staff members receive similar benefits.
Excellent record-keeping is fundamental. It is crucial at lunches for example to note who was there because the portion relating to staff members might be subject to FBT while the portion relating to clients would not generally trigger FBT.
In addition to determining whether there is an FBT issue, these records will also generally be used to check whether the business can claim a deduction and GST credits for the expenses. The ATO's approach is very evidence-based, there needs to be documentation to back up whatever the business is claiming.
That record-keeping can be difficult, especially if they do not have a dedicated internal accountant.
Motor vehicles are another key FBT issue. Many businesses provide cars to staff or allow them to take vehicles home but this can easily trigger an FBT liability - although again, some businesses may be unaware of that.
While there are some exemptions that can apply to these benefits and it may be possible to reduce or eliminate the FBT liability completely, it is crucial that there is detailed record-keeping. For example, a car that is used solely for business purposes could still potentially trigger a significant FBT liability unless there is a valid log-book in place.
There can be questions raised by the ATO if for example a business has substantial motor vehicle expenses, yet they do not lodge an FBT return.
You cannot avoid the FBT system by simply not claiming a deduction for expenses relating to a vehicle.
You need SMART solutions for YOUR business, not just annual tax compliance! Get the SMART team working with you. Call SMART Business Solutions today on 03 5911 7000 or reception@smartbusinesssolutions.com.au.
With the borders between the State and Territories all but open and 2021 in sight, there is a hunger for a return to normal. With Australia's desire to ‘get on with things,' sentiment reached its highest level since November 2013 and Christmas spending is expected to be consistent with previous years.
Stimulating investment is high on the Government’s agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use.
We’ve had quite a few questions about the JobMaker hiring credit announced in the 2020-21 Federal Budget. The legislation enabling the JobMaker scheme has not passed Parliament as yet and until this occurs, the JobMaker rules are not certain and may change.