March 31 and the end of the FBT year is around the corner, so to help practitioners get things right for their clients, the ATO has made public the fringe benefits tax issues that attract its attention.
Broadly (not just in relation to FBT), it says the following behaviours and characteristics tend to raise a red flag:
tax or economic performance not comparable to similar businesseslow transparency of tax affairslarge, one-off or unusual transactions, including transfer or shifting of wealthtax outcomes inconsistent with the intent of tax lawlifestyle not supported by after-tax incomeaccessing business assets for tax-free private usepoor governance and risk-management systems.
But focusing on FBT in particular, the ATO says there are specific behaviours and characteristics that attract its attention, especially in relation to certain areas of the FBT rules. These include issues involving aspects of the living-away-from-home allowance (LAFHA), car parking, employer-provided vehicles and more. The areas the ATO has stated it will be focusing on with regard to FBT are listed below.
Living-away-from-home allowance (LAFHA) LAFHA is an allowance an employer pays to employees to compensate for additional expenses incurred and any disadvantages suffered because the employee’s duties of employment require them to live away from their normal residence.
The taxable value of the LAFHA benefit may be reduced by the exempt accommodation and food components of the allowance (see link below).
Common errors that the ATO says attracts its attention include:
claiming reductions for ineligible employeesfailing to obtain required declarations from employeesclaiming a reduction in the taxable value of the LAFHA benefit for exempt accommodation and food components in invalid circumstancesfailing to substantiate expenses relating to accommodation and, where required, food or drink.
# [ATO], [fbt], [fringe benefits], [tax]
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