Vehicle-related expenses and even the make and model of the car you drive can attract extra scrutiny from the ATO, an accountant has warned, citing the example of a manufacturing business.
Speaking on the My Business Podcast, Alexander Laureti of LMS Advisory revealed that a manufacturing business had its fringe benefits tax (FBT) history reviewed by the Tax Office because of a BMW.
“I did have a phone conversation with an ATO officer not too long ago, and the comment was... [the taxpayer was] in the manufacturing industry, and they had had a number of vehicles actually. The FBT review that came up purely started because the owners of the business had purchased a BMW, a new vehicle, and the business wasn’t registered for FBT,” he explained.
“Now there’s nothing sinister or untoward about that; there was a private-use portion that was being claimed, but the ATO didn’t see an FBT tax return being lodged on an annual basis, and they said ‘there’s a BMW in a manufacturing business — why? We’d like to find out more information about this’.
“And a whole questionnaire came out relating to all of the vehicles that were owned for a number of years.”
Mr Laureti urged anyone that has, or is looking to, purchase a luxury vehicle that will be used — either in full or in part — for business purposes to keep detailed records.
“Please make sure that you’re appropriately either registering for FBT or keeping records of your private-use portions, log books, all of the above,” he said.
“Because if you don’t have those records in place and you do come up for ATO review later on, you could get some nasty surprises.”
Brand not only red flag for ATO
It isn’t just the brand of vehicle that can attract the ATO’s attention, Mr Laureti agreed, but also the type of vehicle in question.
“The family car can be such different cars these days, and by the same token, you could take the family around in a four-door ute or you can have your tools of trade on the front seat, you can have all kinds of things that are being carried around. So, the same vehicle could have a different purpose to 50 different owners of [that type] of vehicles,” he said.
“Because the ATO doesn’t know, they will ask the questions, and the problem is that you have got to stop and take the time to answer these questions, and while the ATO is having a look around, what other things might they ask you about?
“Not to say that businesses are out there doing things that are inappropriate on purpose, but everyone just wants to get on with their businesses and not have to stop and be subject to reviews.”
Mr Laureti added: “The great majority of people are doing the right thing, and they’re lodging their tax returns and their compliance all in good faith, and yeah, these reviews are a distraction.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.