Tax, and How to Make it Work for You
With 3 months to go, this is the time to find out if the systems you have in place are working to your full advantage. It’s not the most riveting way to spend an afternoon, but organising your finances now will help avoid penalties later.
Paul Stacey, the tax counsel for the Institute of Chartered Accountants in Australia, says
“Those penalties start at 25 per cent of the unpaid tax but can be as high as 75 per cent.”
Looking at all your staff and checking if contractors are really employees will make a huge difference.
The building and construction sector are already annually reporting to the ATO all payments to contractors, but this could well be useful across many businesses.
Fringe Tax Benefits
Car claims can be a nightmare if they’re not dealt with properly. If you have employees who use a car for business purposes, you may decide a company car is warranted, or to reimburse the fuel expenses.
The Fringe Tax Benefits (FBT) system in relation to cars means that your employee can claim for mileage, maintenance and insurance.
Cents Per Mile
The way this is measured is for your employee to:
- Determine the distance travelled by the vehicle in question (yearly).
- Determine the % of the annual distance travelled for the employee’s private use.
- Multiply figures from 1 and 2 to create the annual distance travelled for private purposes.
- Estimate the cost per kilometre for a vehicle of the type used. This information can be obtained from the RACV, NRMA, or like motoring organisations
- Multiply the annual distance travelled for private purposes by the estimated cost per kilometre. The result is the value of the motor vehicle component of an employee’s remuneration.
Is my Company eligible?
In order to qualify, your company must have the following pre-requisits:
- Minimum 50% of the vehicle’s total annual mileage must be for your trade/business.
- The car must have been driven at least 10,000 kms during the year, mostly by employees.
- A ‘car’ for these purposes can mean:
- Motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of >1 tonne)
- All other goods-carrying vehicles designed to carry less than one tonne
- All other passenger-carrying vehicles designed to carry fewer than nine occupants.
One thing is for sure, whether the Car Fringe Benefits relate to your business or not, arranging your tax affairs now will save a lot of hassle further down the line. Find more information on FBT from the Australian Taxation Office and how they affect you, click here.
Hannah Brankin is a passionated editor for car logbook – YourCarLog and often gives very useful advices about car related issues.