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ATO Checking On Businesses That Hold Cars

ATO Checking On Businesses That Hold Cars

  • Wednesday, 02 January 2019 13:22

The Australian Taxation Office (ATO) has recently written to tax agents on behalf of clients who have cars registered in their business name but have not lodged an FBT return. The ATO is clearly targeting situations where cars or other motor vehicles have been used by employees or their related parties but the FBT issues have not been dealt with properly.

Data matching programs are allowing the ATO to identify business entities that hold vehicles but don’t lodge FBT returns.

Businesses that hold cars or other vehicles are potentially exposed to historical FBT liabilities unless they can convince the ATO that either:

  • No fringe benefit has been provided; or
  • The taxable value of the benefit has been reduced to nil (potentially through employee contributions).

While it is reasonably common for businesses to manage FBT issues through employee contributions, it is important to ensure that there is evidence supporting the fact that sufficient after-tax contributions have actually been made.

If employee contributions have been made, then the ATO would generally want to ensure that any flow-on tax implications have been managed properly. This could include amounts being included in the assessable income of the employee (e.g., where a set-off arrangement is used) as well as checking that the contribution amount has been recognised for income tax and GST purposes by the employer where applicable.