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Don’t be a victim of the ATO crackdown on FBT

Article By | | Accounting & Tax

The ATO have been threatening a crackdown on fringe benefits that small to medium business are providing to owners, employees and their associates.

Areas the ATO have highlighted for audit activity include:

Utilities and Commercial Vehicles

With the popularity of dual cab utes increasing significantly in recent years, the ATO is reminding taxpayers that the exemption for utilities and commercial vehicles is based on the private use being minor, infrequent and irregular. The ATO looks at the following factors when considering if the exemption applies:

  • An eligible vehicle is provided. This includes panel vans, single cab utes. eligible dual cab ute, four- wheel drive vehicles and other modified vehicles
  • The vehicle is provided to allow the employee to perform work related duties
  • The vehicle has no non-business accessories, eg: child restraints
  • Not provided through a salary sacrifice arrangement
  • The employee travels to and from home with a deviation of no more than 2kms
  • The employee’s private use is no more than 750kms annually and 200kms in a single journey
  • The employer takes all reasonable steps to limit the private use and to have measures to monitor private use.

Car Parking

The ATO is targeting employers who provide a car parking fringe benefit where the value being declared is less than the market rate. Taxpayers must substantiate that:

  • there is a commercial parking station that charges a fee for all-day parking within a one-kilometre radius of the premises on which the car is parked, and
  • the all-day parking fee is more than the car parking threshold ($8.66 for the 2018 FBT year)

Living Away From Home Allowances

The payment of Living Away From Home Allowances (LAFHA) to employees may result in FBT. The amount subject to FBT is the amounts paid in excess of reasonable amounts deemed by the ATO. The ATO are specifically targeting the following

  • Ensuring the purpose of the travel is in the course of performing work duties
  • Relevant declarations are completed
  • Relevant substantiation is supplied documenting that an actual expense was in fact incurred

Loyalty or Frequent Flyer Points

Many small to medium business owners will use business credit cards with an attached rewards program.  Where the points earned are redeemed on personal expenses for themselves or employees, a fringe benefit can arise.  The value of the benefit is the market value of that personal expense.

These are just some areas employers and business owners need to consider this FBT year. We recommend all business owners review their benefits to employees to ensure they meet their FBT obligations and avoid an ATO audit.

If you have any questions or concerns around how FBT applied to your business, please contact your Altitude Adviser.