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FBT and business vehicles

Business owners who make a car (leased or owned) available for employees to use for private travel may be subject to fringe benefits tax (FBT).

If a car is garaged at or near your employee’s home, even if only for security reasons, it is considered by the ATO to be available for their private use regardless of whether or not they have permission to use the car privately.

Similarly, where the place of residence and employment are the same, the car is considered as private use. Generally, travel to and from work is also private use of a vehicle.

The use of the car is exempt from FBT in some circumstances, i.e an employee’s private use of a taxi, panel van or utility designed to carry less than one tonne if the travel is limited to:
– travel between home and work
– incidental travel in the course of performing employment-related travel
– non-work-related use that is minor, infrequent and irregular

The best way to show the ATO that a car is used for business purposes is by keeping a log book for a period of at least 12 consecutive weeks showing:
– dates of travel
– odometer readings at the start and end of any trips
– the kilometres travelled
– the reason for the trip

Business owners should also keep odometer readings at the start and end of each year, along with details of the operating costs of the car.

Note, company directors are generally considered as employees by the Tax Office, so if directors use the car for private purposes, then FBT could apply.

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What Are The Consequences Of Improperly Lodged Tax Returns?

May 4, 2021

With tax return season approaching quickly this year, you may have already started looking into lodging your income tax return. Ensuring that your details are correct and that any information about your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent. However, if during this income tax return process the tax obligations of the taxpayer fail to be complied with, the Australian Taxation Office has severe penalties that they can enforce.

Australian taxation laws authorise the ATO with the ability to impose administrative penalties for failing to comply with the tax obligations that taxpayers inherently possess.

As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not. In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to a tax law.

The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which are as follows:

If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:

To ensure that the statements, returns and lodgements are done correctly, and avoid the risk of potential penalties, contact us today. We’re here to help.