Why the ATO is looking closely at you this FBT time
Almost half of all tax collected flows through about 800,000 employers. In an environment where tax revenues are falling, Fringe Benefits Tax (FBT) is of particular interest to regulators. The simple reason is that the ATO can rely on the fact that many employers simply fail to recognise their FBT obligations - it is low hanging fruit.
To save you from the virtual equivalent of a knock on the door from the ATO, we’ve devised our list of the key things to watch out for pre and post the end of the FBT year on 31 March:
Cars & FBT: what you should be on the look out for
Every year the ATO tells us what sort of things they’re looking out for and they are always interested in cars! The ATO’s view is that there are probably plenty of situations where FBT should be paid but isn’t.
One of the ways the ATO figures out if there is an FBT liability is by looking at companies claiming car expenses but are not lodging FBT returns and not reporting employee contributions on the company tax return. This doesn’t mean there is a problem but in some cases the ATO might ask you to prove that the car expenses don’t trigger FBT.
Car fringe benefits: Rudd Government changes now six feet under
Before the election, the Rudd Government sent the car and finance industry into a spin by announcing that they would scrap the Statutory Formula Method used to calculate fringe benefits tax on cars. The Abbott Government has now formally stated that they will not proceed with this measure.
If the statutory formula method had been scrapped, there would be an adverse effect on the taxable value of car fringe benefits where the car was mostly used for private use or the employee failed to keep an eligible log book. When using the statutory formula method, the taxable value of car fringe benefits is a flat 20% of the base value of the car, regardless of the distance travelled by the employee (note there are transitional rates in certain circumstances).
Selling shares or property? Why the ATO is looking over your shoulder
Data matching helps the ATO identify taxpayers that have not declared the full amount of income they make on their tax return.
They are now looking to expand the sources of data they match to make sure they get every last cent owing from the 12.4 million individual income tax returns lodged.
Treasury released a discussion paper on tax compliance and ATO data matching; putting forward ideas on some ways they wanted to increase the powers of the ATO to data match to cover areas such as sales of property, shares and units, and sales through merchant services. And you can understand why given that in 2012 alone, the ATO identified 1.4 million anomalies in property sales data compared to what was declared on income tax returns for Capital Gains Tax purposes.
The discussion paper is a ‘warning’ of what is coming. It’s likely that in years to come, the ATO won’t need you to tell them what you’ve been doing, they will already know.
AusIndustry R&D deadline looms
The deadline to register with AusIndustry for the R&D Tax Incentive ends on 30 April.
The tax incentive is there to help businesses offset some of the costs of doing R&D. The program is open to businesses of all sizes in all sectors that undertake eligible R&D. If your business’ activities are eligible, the offset can be a huge benefit offering:·
a 45% refundable tax offset (equivalent to a 150% deduction) to eligible entities with an aggregated turnover of less than $20m pa; or·
a non-refundable 40% tax offset (equivalent to 133% deduction) to all other eligible entities.
If you are uncertain whether your business would qualify for the R&D Tax Incentive, contact us today.
Disclaimer: All material contained in this paper is written by way of general comment. No material should be accepted as authorative advice and any reader wishing to act upon material contained in this paper should first contact Youngs for properly considered professional advice, which takes into account specific situations.
Remember to call (03) 5559 1444 for a free discussion if you have any queries.