If your business provides work vehicles to employees, it’s important to make sure your Fringe Benefits Tax (FBT) obligations are being handled correctly.

The ATO has flagged work vehicles as an area of concern, having identified that many businesses are not properly meeting their FBT obligations where vehicles are also available for private use.

This is about more than just compliance. Failing to report fringe benefits, or reporting them incorrectly, can create tax issues for employees and place your business at risk of audits, penalties and interest charges. Getting it right helps ensure a fair outcome for everyone and keeps your business on solid ground.

According to the ATO, some of the more common problem areas include:

• Not lodging an FBT return when on is required
• Assuming a dual cab ute is automatically exempt from FBT
• Incorrectly applying vehicle exemptions
• Failing to properly apportion private and business use
• Not keeping adequate records, such as valid logbooks

The errors can be costly and may also affect your business reputation, making it even more important to stay on top of your obligations.

In general, if a vehicle is made available to an employee, or to their family members or associates, for private use, FBT may apply. Where that happens, your business may need to lodge an FBT return and pay tax accordingly.

The key issue is understanding when a work vehicle becomes a fringe benefit. Simply providing a vehicle for business purposes does not automatically create an FBT liability, but allowing private use often does.

The ATO is also using increasingly sophisticated data-matching and analytics to identify employers who may not be meeting their obligations. Compliance activity in this area remains active, particularly where employers have failed to lodge or have incorrectly claimed exemptions.

If you’re unsure whether your work vehicles are being treated correctly for FBT purposes, now is a good time to review your position.