“There’s a lot of uncertainty around what attracts FBT and what doesn’t attract FBT, in some cases there’s a fine line between definitions, which leads many FBT return preparers each year into making costly mistakes, often resulting in the need to revise and resubmit information to the Australian Taxation Office,” warns KPMG tax partner Andrew Purdon.

“While FBT returns aren’t due for lodgement until May, there is a great deal of data that needs to be collected prior to March 31 to avoid headaches at return time.”

The information collection process should start before March 31 to reduce the workload when actually preparing the FBT return, according to Purdon.

Sending out requests for car odometer readings to employees before FBT year-end usually reduces the workload after year-end. Analysing expense payments during a quiet hour or so now can also help reduce careless mistakes made during the hasty review hours before the return has to be lodged.

“Many employers using the statutory formula method of calculating car fringe benefits leave the obtaining of odometer readings to the last moment,” Purdon said.

“As a result, if employees are not contactable or are too busy to provide the necessary information to the FBT return preparer, estimates are quite often made by the FBT return preparer only to be challenged by the employee using the car once the reportable fringe benefits amount is actually notified to the employee.

“This can result in amendments to the FBT returns already lodged, costing businesses extra time and money.”

Seven tips for a hassle-free FBT season

· Remember to gross up for goods and services tax (GST) if you’re taking figures out of ledger accounts;

· Late lodgement of FBT returns incurs penalties, so make sure you get it in on time;

· Check the FBT status of items you’re unsure of, such as gifts to employees on special occasions and gifts to employees on termination of employment;

· Remember, just because you don’t claim GST input tax credits doesn’t mean you can use the lower FBT gross upgrade;

· Keep up with recent legislation changes. For example, new exemptions exist for PDAs, and portable printers for use with portable computers from 1 April this year, but in some cases exemption from FBT may be claimed for these items this year;

· Don’t forget that entertainment that is not subject to FBT will not be deductible for income tax purposes; and

· Don’t forget to make the FBT and GST treatment consistent for entertainment – if there’s no FBT, there can be no GST input tax credit.