ATO targeting fringe benefits tax
The ATO has fringe benefits tax (FBT) in its sights this tax time, with a crackdown on employers that are deliberately avoiding or minimizing their tax payable.
The specific areas of focus include:
Situations where an employer-provided motor vehicle is used, or available for private travel or employees. This constitutes a fringe benefit and needs to be declared in the fringe benefits tax return (if lodgement is required). There are circumstances where this may be exempt, i.e., where the entity was tax exempt or the private use of the vehicle was exempt. Some employers fail to identify or report these fringe benefits or incorrectly apply exemption provisions.
The Tax Office is focusing on situations where employee contributions that have been paid by an employee to an employer are declared in both the fringe benefits tax return (if lodgement is required) and the employer’s income tax return. Focusing on this issue helps to ensure that the employer does not fail to report these contributions as income in their income tax return and that the employer does not incorrectly overstate employee contributions in their fringe benefits tax return to reduce the taxable value of benefits provided.
Employers who provide fringe benefits must lodge a fringe benefits tax return unless the taxable value of all benefits has been reduced to nil. Common errors include failure to identify fringe benefits provided and incorrect calculation of benefit values or reduction amounts.
The ATO is cracking down on employers that apply for a fringe benefits tax rebate when they are not eligible. Rebatable employers are certain non-government, non-profit organisations.
Car parking valuation
The validity of valuations provided in relation to car parking fringe benefits is also under ATO scrutiny. Errors that attract the Tax Office’s attention include:
- market valuations that are significantly less than the fees charged for parking within a one kilometer radius of the premises on which the car is parked
- the use of rates paid where the parking facility is not readily identifiable as a commercial parking station
- rates charged for monthly parking on properties purchased for future development that do not have any car park infrastructure
- insufficient evidence to support the rates as the lowest fee charged for all day parking by a commercial parking station.