Tax Tip Tuesday: Surviving an FBT Car Audit

Whenever you get audited by the ATO it’s never a good thing. FBT Car Audit Activity is on the rise.

If you have a non commercial vehicle in a company or trust structure you should be prepared if you do have an audit as coming through unscathed may be difficult.

Here are some tips.

Valid Log Book for 12 Weeks

If you are using the operating cost method or log book method to determine the fringe benefit calculations you will need to at the very least have an log book for 12 weeks.

Be it in paper or electronic form.

A better idea is to do the log book at the actual time rather than trying to recreate one.

ECarlog

ECarlog would be the best app I’ve seen.

Not only does the odometer reading work for you but you demonstrate where you went. Now for the log book to be a valid representation of the percentage that you will use it needs to be relevant to the situation as a whole.

Keeping annual kilometre odometer readings is crucial. CTBS send our clients a declaration form to record this info at the end of March 2014.

If you travel annually lets say 20,000 kilometres then it would be expected the 12 week log book would be close to 4,500 kilometres.

If your log book only for the 12 weeks only shows 3000 kilometres then it won’t be valid.

Also required is some proof that you visited the sites or client premises at the time (an invoice, diary record, purchase order).

A sample of 5 or more would be required. So as you can see it is difficult to ensure that you are completely ready.

Having a car in a private name for private use is a must if you want to claim a high percentage of business use on your car in the company name.

Calculations

Ensure that you use the correct calculation methods including imputed interest and that the running costs correlate correctly.

If you have spent $4,000 on fuel but only completed 10,000 kilometres then you would have an obvious problem.

Statutory Formula

If you don’t have a valid log book or haven’t kept one then you may be using the Stat Formula to calculate the Fringe Benefit.

This generally requires you to apply a 20% calculation to the original vehicle cost including GST but not stamp duty or rego.

An important record is to keep a track of days the vehicle is not available for private use (eg car in the repair shop, overseas trip where you have given up control of your car keys to an external party).

Home to work travel rarely deductible

If you have separate premises to your home then home to work travel in a car will generally be treated as such and it private.

If home is a place of business and you travel to another employer (working as an employee) this travel is also considered private.

Mixed Travel

Generally if you go to the shops with and spend $500 on private groceries and $100 on some work stationery – the travel is considered private as the stationery was really an incidental purpose and not the main purpose.

At CTBS we are here to help our clients get through any audit activity. It can be a stressful time. Contact tim@ctbs.net.au or (07) 32672111