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ATO crackdown on fringe benefits and how their data matching can catch you!

Ben Johnston
23 April 2021

The ATO has announced an audit initiative that is looking into small business and the black economy alike, and if you think they are polar opposites in terms of ATO focus you need to think again. In fact, if you own a car valued at over $10,000 in your business name the ATO has you in their sights and it’s something that will change the game when it comes to big brothers’ approach and the sophisticated way in which the government is undertaking audits.

Last month the ATO announced it has rolled out a data matching program that aims at identifying businesses and individuals that are either not declaring all of their taxable income or are avoiding paying Fringe Benefits Tax through their business. The ATO has requested data from Australia’s motor registry in each state and will use this data to identify taxpayers that have a disproportionately low income compared to the value of car that they drive. So, if you’re driving around in a Ferrari but declaring an income of only $20k a year, you better adjust your rear vision mirror because the ATO are coming for you.

Likewise, this will also apply for businesses that own cars in a company name but fail to fulfil their FBT obligations. The owners of many of the Range Rovers or BMW X5s driven around by the wives of local builders better make sure that their logbooks are up to date or they could find themselves with a hefty fringe benefits tax bill plus interest and penalties.

The ATO has information on 1.5 million individuals so the scope of this initiative is enormous. After the relaxed approach the ATO took to chasing tax through the Coronavirus pandemic period, expect things to ramp up as the government looks at ways to recover the billions of dollars in stimulus measures it introduced to keep our economy ticking over.

While the focus of this initiative is FBT, it shows what the future of compliance and audit will look like, highlight autonomous, targeted and more than anything, FAST.

Tips to assist in avoiding ATO scrutiny and dealing with your motor vehicle FBT obligations:

  • Always declare all income earned by your business including cash sales.
  • Have your staff keep a logbook to record business travel in work vehicles.
  • Prepare a workplace policy regarding private use of company vehicles.
  • Register your business for Fringe Benefits Tax if you own a company vehicle or provide employees and/or their associates a work vehicle.
  • Lodge & pay your FBT obligations on time with the ATO.
  • Consider paying your employees a car allowance rather than providing them with a company owned vehicle.
  • Ensure all tax invoices/receipts are kept on file for vehicle related costs.
  • Consider applying the Employee Contributions Method to car benefits whereby employees contribute towards the private use of their vehicle. This is a great way to reduce your businesses FBT exposure.
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