Even businesses that are getting their income tax and GST right can miss other obligations, such as fringe benefits tax (FBT). FBT may apply if your business provides a company car that's available for your employee's private use.
To help your business get it right and know what to look for to understand your obligations, we’ve shared the following case study on how one business got it wrong.
Case study: business purchases company car leading to an unexpected tax bill
We audited a small online clothing business and found that while it was correctly reporting its income tax and GST, it overlooked its fringe benefits tax (FBT) obligations.
The business purchased a car for its owner to use in their position as an employee of the business. As the car was garaged at the owner's home it was considered to be available for private use, so FBT applied. They also didn't keep adequate logbook and odometer records, without these, the business couldn't:
- show how the car was used to prove the amount of business use
- calculate the FBT based on the actual usage so ended up with much higher FBT liability than necessary.
This wasn't deliberate non-compliance by the business. They were dealing with significant personal pressures and unaware that a fringe benefit was being provided which created a lodgment obligation.
Once we explained the issue, we worked with the business to lodge their outstanding FBT returns and put arrangements in place to help manage their obligations and maintain their record keeping going forward.
End of exampleStay in the right lane and get it right
Getting advice early and keeping accurate records, including logbooks and odometer readings, can help avoid unexpected costs later.
Our Essentials to Strengthen Your Small Business course on Car Fringe Benefits taxExternal Link provides a practical overview to help you understand your obligations.
Find out How FBT applies to cars and Record keeping for FBT. You can also speak to a registered tax practitioner for advice.
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