Imagine the following.
An employer provides a Ute to an apprentice. The conditions of employment meet the FBT requirements and the employee provides a certificate that any use is incidental. The apprentice is able to establish that the employers’ tools are delivered back to the employers’ premises each night and are collected again each morning and all requirements for incidental use of the Ute are satisfied.
No FBT is paid.
But what if: Technology comes to the assistance of the tax office when they conduct a review of the return of the employer. The log of the tolls shows that that Ute is used at the weekends for travel which is clearly related to private use e.g. the apprentice has used the Ute to go surfing, or visit normal haunts on a Saturday evening.
The end result is that the incidental use exemption is no longer available.
The employer will be subject to FBT and quite probably penalties for an incorrect return. The employee would not have prepared a log book, because he hasn’t been asked for one and the employer didn’t expect to fail.
The statutory formula may be the only salvation, but kilometres haven’t been recorded, so it could be that 26% of the cost of the vehicle is the FBT payable
Ouch! And now there is a serious debate with the employee, because they have breached their conditions of employment, but is the employer ever going to be able to recover that tax and penalty?
21st-April-2012 | 