Fringe Benefits Tax will be imposed on the employer even if it is framed to seize the benefits enjoyed by an employee. Even if your employment agreement permits you for any FBT returns that becomes payable to be regained from the employees, the employer will have no possibility for reimbursement.
Why the employer must lodge FBT returns even when FBT is not payable? The most common reason behind it is that it takes a minimum of 3 years for the ATO to initiate Audit activities.
If the FBT returns are not been lodged, the ATO retains an option to initiate auditing the activities as long as employees are working for the business. ATO can raise the FBT liabilities if FBT is not been lodged for signed declarations, logbooks, meal entertainment records, etc even if the employees enjoy the benefits but no longer works for the business. Therefore facilitating the business to regain everything.
People start making mistakes when an employer suspects that they have done everything according to the legislation. A common mistake occurs when an employee is offered the car and the personal use is calculated using the operating cost (logbook) method. A portion of utilizing the logbook procedure is functioning as deemed depreciation every year and many of the accountants leave this and work inappropriately by depending on the depreciation claimed on the business’s financial statements. This mistake could raise the FBT liability to the point where the intended employee’s contribution is inadequate to remove the car’s taxable value.
Another usual mistake is not having the proper records of the employees who received the meal entertainment benefits. It is essential to maintain the records as entire meal entertainment benefits are not equally treated.
ATO could able to review for a long duration the car owned by the business to if these mistakes are identified easily.
Lodging an FBT return would limit the duration of the ATO who are responsible to audit for continuous 3 years.
For example-You are having two employees Ricky and Morty working at your organization. The job of Rick is to impress potential and existing customers at various social events where food and drinks are served whereas Morty’s job is to complete the projects which Rick Won. At the end of the year, the food and drink consumed by Ricky will not be exempted whereas food and drink consumed by Morty will be exempted. In the absence of the record of the FBT returns and meal benefits received by the employees, The ATO retains endless scope to audit your records for liabilities.
The ATO has instructed that there will be a maximum focus on FBT in the ongoing year. It is advisable to contact your advisor at MaxMargin Accountants if you wish to limit the ATO’s ability to initiate the ATO audit.
Max Margin Accountants is a registered accounting firm based in Melbourne. We specialize in helping our clients with a full array of Business Advisory, Taxation and Accounting services. We help businesses in all industries and sectors including Automatic Mechanic, Hotel and Bar, Barber & Hair Dresser, Car Wash, Home Builder & Architecture, Cafe and Coffee Shop, Cleaner, Computer & IT Industry, Family Day Care, Gym and Personal Trainer, Small Businesses, Medical Practitioner, NDIS Business, eCommerce, Property Investors, Tradies and Taxi Drivers.