If you are a medical client of ours, you may have noticed that we sent out an email recently on FBT and the changes we are making to how we calculate and deal with your FBT.
And now you have a second FBT email from me. As you all know, this is not exactly a topic that gets my juices flowing.
So, what’s going on?
Well, the ATO has told us that they know most medical businesses are not recording FBT matters property, nor are they calculating FBT correctly, nor are returns being completed correctly. They believe there is, in the words of the ATO, “a $1.3 Billion FBT Gap.”
I think it is bigger—much bigger. I also know that most medical professionals are not great at keeping records, so if the ATO comes knocking on your medical business door, do not be surprised if they leave rubbing their hands.
I think the ATO is right. Most medical businesses do not understand FBT, and most accountants do not give it a priority because the ATO doesn’t. That is about to change.
Because the ATO has told us there will be a “big focus” in 2024 and beyond when it comes to FBT.
The ATO actually knows a lot of information about you and your business. For example:
- If you buy a vehicle for more than $10,000, they know.
- If you sell a motor vehicle for more than $10,000, they know
- Employee contributions – this is where a business provides an employee or owner a motor vehicle and that motor vehicle is used privately – have also changed so that the business cannot create a loan to it from an employee unless one already exists. They know if you have done that too.
- And finally log books are now being checked to e-Tag records and they know many logbooks are not correct nor accurate. In fact, they have told us they think most log books created by medical professionals are probably fake.
But FBT is not just about Motor Vehicles. It covers, food, drinks, the Xmas party and much more.
The ATO did something nice, too, which, to be honest, was unusual. They told us what they would be concentrating on so that we can tell you in the hope you will listen, change things and get everything into shape.
Here is what they are looking at:
- Cars
There are two ways to calculate potential FBT on cars.
If you want to use the logbook method, the logbook has quite a few requirements. One of these requirements is the logbook (obviously) and we often find that it does not contain enough information.
If there are insufficient records, the calculations used will be the statutory formula, which usually results in more tax—a lot more tax.
Why? Well, most medical professionals I know have expensive cars. Some are very expensive, and when you have to pay tax on 20% of, say, $150,000 EVERY YEAR, this could be a problem. This makes the ATO happy and you very angry.
- Exempt Vehicles
Many businesses think that minor or infrequent use may be exempt.
Many vehicles thought to be exempt are actually not exempt either.
Exempt vehicles are those not designed to carry passengers, so single and dual cabs usually do not qualify. Vans, on the other hand, do.
Not that I know many medical businesses that require the use of Utes or vans, but I have been asked in the past by a GP if they purchased a Ute, would it be exempt? If you do happen to have a Ute and want it to be exempt, then the private use must be minor, infrequent, and irregular. If it is not, then FBT is still due.
- Portable devices
Provide two devices in the one FBT year that perform different things, and then both devices can be exempt. But if they both have the same functionality, the second one is subject to FBT. An iPad and iPhone may be okay, but giving a laptop and a tablet pc may not be.
The item must be mostly used in the employee’s employment. If you give it to an employee and then give it to the kids for school, then that device is subject to FBT. And remember that if you give a device as an incentive gift or bonus, you pay FBT unless it can be shown to be primarily for use in the employee’s employment.
Paying or calculating FBT is step 2 of our 9 steps to work less, earn more and create wealth. If you would like to know more contact Hitesh at hitesh@medisuccess.com.au or call 07 3161 9548.
