Despite the fact that the Fringe Benefits Tax (FBT) is intended to capture benefits received by employees, it is levied on the employer. The employer will have no recourse for reimbursement unless your employment agreement allows for any FBT that becomes payable to be recouped from the employee. So, why should an employer file an FBT return if no FBT is due? For the simple reason that it establishes a three-year deadline for the ATO to begin audit activities.
In the absence of an FBT return, the ATO has the authority to conduct an audit of activities dating back as far as a business has had employees. Without evidence (e.g., signed declarations, logbooks, meal entertainment records, etc.) that FBT was NOT payable in each year, the ATO is likely to increase FBT liabilities, even if the employee who received the benefit no longer works for the company. As a result, the company will be unable to recoup any of its losses.
People will make mistakes when an employer believes they have done everything in accordance with the law. When an employee is given a car, the private use is calculated using the operating cost (logbook) method. Working out deemed depreciation each year is a part of using the logbook method, and many accountants overlook this or work it out incorrectly by relying on the depreciation claimed on the business' financial statements. This error can result in an FBT liability if the calculated employee contribution is insufficient to offset the taxable value of the vehicle.
If an error like this is discovered, the ATO will most likely conduct a review of the entire time the car was owned by the business. If you file an FBT return, the ATO will only be able to audit you for three years.
Another common blunder is failing to keep track of which employees receive meal entertainment benefits. Because not all meal entertainment benefits are treated the same, keeping a register is essential.
If you have any enquiries, please feel free to contact us at Instant Tax Refunds. We will gladly assist you.