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The ATO wants tax practitioners to help police the system, says FBT specialist Paul Mather.
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Accountants ‘need to raise their game on FBT’
27 March 2023
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The ATO believes accountants need to raise their game when it comes to FBT and shed myths about the tax, says FBT specialist Paul Mather, who says the office is trying to enlist the profession in policing the tax.
He said ATO was on the warpath about the $1 billion FBT tax gap and the 800,000 employers unregistered for FBT – compared with just 100,000 in the system – were prime suspects.
Speaking on the latest Accountants Daily podcast, Mr Mather said most of 800,000 would be small businesses and many – along with their accountants – were putting FBT in the too-hard basket.
Mr Mather, who is co-founder of FBT Salary Packaging Solutions, said a lack of knowledge was part of the problem and work vehicles were responsible for much of the tax gap.
“We hear about tax agents and tax practitioners who are saying, ‘You don’t have to worry about keeping a logbook, it’s probably 80 per cent business and the other 20 per cent that’s private we can fix that up through a contribution by the employer-owner of the organisation’.
“But that’s a big assumption to say that the business use is 80 per cent. It often isn’t – nowhere near that. You can’t reduce a value in a fringe benefit without having the proper documentation. You can’t just say it’s 80 per cent, you need to have a logbook that is valid and meets all the requirements to actually take that reduction.”
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He said ATO staff no longer went to sporting events and shopping centres on weekends looking for work vehicles because now the office could data match with vehicle registries.
“They’re targeting the low-hanging fruit,” he said. “They pretty much know once they do that matching process.”
He gave an example of one client with half-a-dozen vehicles, including several luxury cars, registered in their business which got a letter from the ATO warning of an FBT audit.
“The issue was they weren’t registered for FBT and they had five or six vehicles registered in the business name.
“They were very much of the view that we use these vehicles for business, etc, but the problem is they don’t have the documentation to prove that, there’s no logbook records.
“It ended up in quite a bad space. They ended up with significant FBT liabilities, about half a million dollars. On top of that there’s a 25 per cent penalty, there’s interest charges.”
Once the door opened, the ATO began asking questions about other tax issues.
“So it’s an FBT audit but now they’re looking over into GST, they’re looking into income tax, in terms of underpayments there.
“With the FBT, then they drilled further into it and there was quite a large outstanding loan with one of the former directors and there was a lot of meals out, gifts. So they really drill into these things.”
Mr Mather said the ATO made it clear it wanted tax practitioners to have a clearly defined FBT service line and “work more closely with your clients around FBT”.
“So they need to close up that communication gap and that knowledge gap. They need to upskill a bit around FBT and get their knowledge up. They need to lose all the old myths and misunderstandings that there are with FBT and understand what the law says and what the obligations are.”
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