Tax by acronym – watch out for GST, CGT and FBT issues

The ATO suggests taxpayers should keep the following records:

• Financial statements prepared just before the CGT event (e.g. a sale of an asset) and evidence of the market value of all relevant assets at that time, to show eligibility for the $6 million maximum net asset value test.
• Evidence of carrying on a business and calculation of turnover to demonstrate eligibility for the small business entity test.
• Records supporting how any capital losses have been calculated and carried forward to later years.

Creating accurate records is one thing, but they must also be kept for at least five years after the relevant CGT event has occurred. Failure to do so is likely result in penalties.

Cars are on ATO FBT radar this year

FBT returns for the 2011-12 FBT should by now have been lodged. One of the issues the ATO is looking at closely is FBT and cars. It is conducting a campaign to make sure employers who have purchased a car during the 2011 and/or 2012 FBT years are aware that they may have FBT obligations.

Data obtained by the ATO from various motor vehicle registration bodies has helped it identify employers who have purchased a business registered vehicle but have not registered for FBT. While this is a very simple and basic data match, it shows how such a simple check can lead to queries from the ATO. As a result of the data, the ATO is writing to about 5,000 employers who fall into this category, to tell them about car fringe benefits and what they need to do to comply with FBT obligations.

The ATO is particularly highlighting that:

• If a car is garaged at home, it is taken to be available for private use. That means FBT is payable even if the employee is away on holidays and leaves the car keys with their employer. To avoid this outcome, the car should be left at the employer’s premises during such absences.
• As a general rule, travel to and from work is private use of a vehicle. However, travel between home and work may count as work travel where an employee is on call while on stand-by, and starts their duties when they receive the call. Also, where an employee travels from home to the premises of a client or customer, the ATO may accept that as business travel.

While tax compliance is a year-round matter, it pays to keep up with specific issues the ATO may flag from time to time.

Terry Hayes is the Editor-in-Chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.