Cars are a confusing issue when it comes to the fringe benefit tax, specifically employers providing employees with vehicles. Some Australians do not understand how to properly apply this fringe benefit to their taxes. A common problem arises when the employer does not disclose the fringe benefit.
Family vs. Employee
When an employee is related to the owner of the company, some families assume that the rules are different. They are more than just workers; they are relatives. As far as the Australian Tax Office is concerned, a relative who is employed by the company is still an employee. It doesn’t matter if they are a child, spouse, parent, or cousin. All income and fringe benefits must be properly reported, just like they would be for non-related employees.
Will I Get Caught?
It is never a good idea to try and hide income or assets from the ATO. Eventually, they will catch up with you. Their methods have become more thorough in recent years as they find better ways to look for inconsistencies in taxes reported versus evidence of other income or assets. For example, in the past, the ATO has used data matching to identify unreported cars provided to employees.
How do they do this? By matching state road registration data with new vehicles that have been registered under a trustee or company name. The default statutory formula is used when determining fringe benefit tax liability.
In the event that the vehicle is considered a luxury car, the penalty can get very expensive. That’s why it is vital that you always identify when a vehicle is provided to a relative for business use or is intended for personal travel.
Fringe Car Benefits for Company Fleets
2017 will see a change in how fringe car benefits are calculated for company fleets. This specifically affects businesses with 20 or more vehicles as well as:
- Vehicles that are considered a “tool of trade”
- Companies that require employees to maintain a log book
- Companies where the employer holds log books for 75% or more of vehicles in the book year
- Vehicles whose make and model are chosen by employers
- Fleets whose vehicles have a GST-inclusive value that is less than the luxury car limit
- Vehicles that were not given as a part of an employee remuneration package
As long as the fleet satisfies any of the criteria listed above, the company is permitted to apply the average business use percentage to every tool of trade car it owns during the log book year as well as the next four years.
Know Your Fringe Benefits Tax
Make sure you know your fringe benefits tax to avoid heavy penalties later. BIS Cosgrove provides expert advice and financial services that can help you maintain proper logbooks and tax records. Contact Brian and the team today to discuss your fringe benefits tax.