ATO reminds practitioners to avoid common FBT mistakes

“If you are a tax professional, the key task is to identify your employer clients you have with pre-existing plug in hybrid arrangements and verify that all necessary documentation is in place,” he said.

“This includes reviewing contracts, advice, letters, and any correspondence that confirms the timing and nature of the commitment.”

Eames also warned that the ATO had identified gaps in tax practitioners’ FBT knowledge, which was leading to errors in taxpayers’ returns.

“Even more concerning, we found gaps in professional knowledge. Some [tax professionals] had not maintained their FBT expertise, and this led to common mistakes being made and their employer clients not complying with their obligations,” he said.

“Around 90 per cent of all lodged FBT returns are done by tax agents, so you, as trusted advisors, play a critical role in helping employers meet their FBT tax obligations.”

To avoid FBT return errors, Eames urged tax practitioners to follow four key steps which he said could help to save clients from unexpected liabilities, extra paperwork and costly penalties.

Firstly, he urged practitioners to identify the type of benefit being provided, which would dictate the calculation methods used to work out the taxable value, and the record-keeping required.

Next, Eames said practitioners should work out the taxable value for each benefit, depending on their respective types. Thirdly, he said that accurate records must be kept to support any claims and calculations made.

Even if the FBT liability was nil, employers may still need to keep records, he noted.

Lastly, he said that FBT returns needed to be lodged on time, and liabilities had to be paid by the due date. Employers with no FBT liability for the year but who are registered for FBT should send the ATO a completed notice of non-lodgement to avoid follow-ups from the ATO.

“FBT returns are due on the 21st of May for employers lodging themselves and tax agents who lodge by paper,” Eames reminded practitioners.

“The due date for the Tax Agent Lodgement Program is the 25th of June, and for this due date to apply, the employer needs to be an FBT client of the tax agent by the 21st of May, and the tax agent needs to lodge the client's FBT return electronically via the Practitioner Lodgement Service.”

He said that following those four simple steps would mitigate most of the mistakes the ATO observed within taxpayers’ FBT returns, reducing the risk of future actions from the ATO.

“We are using sophisticated data and analytics to identify businesses that are not meeting their obligations. We are actively contacting businesses and employers that do not get it right to encourage them to self-correct,” Eames said.

“For employers that do not respond or are not voluntarily complying with their obligations, the ATO may take firmer action to ensure they pay the correct amount of tax and penalties applied can be significant.”