Business owners are bracing themselves for a hefty Fringe Benefits Tax (FBT) bill next month as a payback for buying
Business owners are bracing themselves for a hefty Fringe Benefits Tax (FBT) bill next month as a payback for buying cars under the Government’s stimulus package, according to accountants.
Companies which purchased cars last year as part of the 50 percent Small Business Tax Break will reportedly be subject to FBT as high as 26 percent for providing a fringe benefit to employees when the FBT year ends on March 31.
AccountantsRus CEO Adrian Raftery says a lot of company owners will be in for a huge shock and admits the timing of the FBT year could not come at a worse time for the Government after the Insulation debacle in recent weeks.
“The Rudd Stimulus Package giveth and now the taxman taketh,” Raftery says.
He says those companies who try to avoid their FBT obligations can expect a visit from the Australian Taxation Office (ATO) down the track.
“The ATO already have their database of businesses to approach for FBT purposes…last year’s tax return had a specific item for the 50 percent Tax Break claim being made.”
It is expected some companies may be worse off for taking advantage of the tax break.
“With the company tax rate being 30 percent, when you multiply it by the (Small Business) Break you were effectively getting a 15 percent rebate off the price of the car…not 50 percent like a lot of people believed,” Raftery explains.
“Now the catch is that those car benefits are subject to FBT and in some instances it can be as high as 26 percent if the employees didn’t drive their car much…and that 26 percent is for each year, not just a once off,” he says.
Companies are required to lodge their FBT return by May 21.
However, they can get an extension if they lodge their FBT return with a registered tax agent.