If you are a client of ours, you may have noticed that we sent out an email recently on FBT and the changes we are making to how we calculate and deal with FBT.

And now you have a second FBT email from me. As you all know, this is not exactly a topic that gets my juices flowing.

So, what’s going on?

Well, the ATO has told us that they know most businesses are not recording FBT matters property, nor are they calculating FBT correctly, nor are returns being completed correctly. They believe there is, in the words of the ATO, “a $1.3 Billion FBT Gap.” 

I think it is bigger. Much bigger.

I think the ATO is right. Most businesses do not understand FBT, and most accountants do not give it priority because the ATO does not. That is about to change.

Because the ATO has told us there will be a ‘’big focus’’ in 2024 and beyond when it comes to FBT.

The ATO actually knows a lot of information about you and your business. For example:

• If you buy a vehicle for more than $10,000, they know.
• If you sell a motor vehicle for more than $10,000, they know
• Take out insurance on a car or boat they know.
• How much money you take out of the business they know
• What kind of house you are living in, they know.

So, if you are getting your business to pay for private things, they probably know.

Employee contributions – this is where a business provides an employee or owner a motor vehicle and that motor vehicle is used privately – have also changed so that the business cannot create a loan to it from an employee unless one already exists. They know if you have done that too.

And finally, log books are now being checked for e-tag records and they know many logbooks are not correct nor accurate. If fact they have openly told us they believe a vast majority of logbooks are ‘incorrect’. That’s is being polite. Recently an ATO inspector told me that they know 90% of logbooks are ‘fake.’

But FBT is not just about Motor Vehicles. It covers food, drinks, the Xmas party and much more.

The ATO did something nice, too, which, to be honest, was unusual. They told us what they would be concentrating on so that we can tell you in the hope you will listen, change things and get everything into shape.

Here is what they are looking at:

• Cars

There are 2 ways to calculate potential FBT on cars.

If you want to use the logbook method, the logbook has quite a few requirements. One of these requirements is the logbook (obviously), and we often find that they do not contain enough information.

If there are insufficient records, the calculations used will be the statutory formula, which usually results in more tax. A lot more tax. This makes the ATO happy and you very angry. So do it properly.

• Exempt Vehicles

Many businesses think that minor or infrequent use may be exempt.

Many vehicles thought to be exempt are actually not exempt either.

Exempt vehicles are those that are not designed to carry passengers, so single and dual cabs usually do not have quality. Vans, on the other hand, do. If you have a ute and want it to be exempt, then the private use must be minor, infrequent and irregular. If it is not, then FBT is still due.

• Portable devices

Provide two devices in the one FBT year that perform different things, and then both devices can be exempt. But if they both have the same functionality, the second one is subject to FBT. An iPad and iPhone may be okay, but giving a laptop and a tablet may not be.

And the item must be mostly used in the employee’s employment. If you give it to an employee and then give it to the kids for school, then that device is subject to FBT. And remember that if you give a device as an incentive gift or bonus, you pay FBT unless it can be shown to be primarily for use in the employee’s employment.

Paying or calculating FBT is step 2 of our 9 steps to work less, earn more and create wealth. If you would like to know more contact Hitesh at hitesh@wowadvisors.com.au or Ros at ros@wowadvisors.com.au or call 07 3161 9548.