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Tax agents and clients disagree over business practices: FBT review

Tax agents and clients disagree over business practices: FBT review

A majority of tax agents believe that their clients’ business practices lead to higher FBT compliance costs, despite employers suggesting the contrary, preliminary results from the Board of Taxation’s review show.

Tax&Compliance Jotham Lian 08 March 2019
— 1 minute read

Last year, the Board of Taxation commenced its review of the compliance costs associated with fringe benefits tax, with an aim of identifying areas where time and costs can be reduced.

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While the review is not yet complete, the board has released sample preliminary results from its survey of both employers and tax agents.

Early results show there is a discrepancy between employers’ self-assessment of their capacity to meet their FBT obligations and tax agents who believe that their clients’ business practices increase the costs of meeting their FBT obligations.

Employers believe they have very strong or strong record-keeping abilities, with 72 per cent indicating so but tax agents believe otherwise, with 63 per cent indicating that their clients’ quality of internal business processes and procedures lead to increased costs.

Tax agents also noted that the quality of their client’s IT systems, software and other electronic tools, and the level of engagement of their employees in carrying out compliance processes increased the costs of meeting their FBT obligations.

The board will move to work on the rest of the data collected and formulate appropriate recommendations for the government.

“The board is focusing on ideas that can deliver simplification, compliance cost savings and red tape reduction, and is looking at areas such as record keeping, which many employers have called out as being one of the most unreasonable aspects of the FBT regime in terms of compliance costs,” said the board.

A KPMG survey has estimated that the FBT only raised 1 per cent of government revenue, even though compliance costs were almost five-times higher than other taxes.

The Tax Institute’s pre-budget submission has called for the government to consider repealing 115 taxes which bring in only a small percentage in revenue but impose a large compliance burden on taxpayers. FBT has been cited as one of the taxes which should be considered for repeal.

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Tax agents and clients disagree over business practices: FBT review
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