The ATO’s FBT data matching activities have continued with the launch of its most recent campaign in April 2021 requesting Novated Lease data from Salary Packaging providers.
This is in addition to the ATO’s motor vehicle registries data-matching program which was announced in January 2021 where the ATO advised it was obtaining data from State and Territory motor vehicle registry authorities to allow Fringe Benefits Tax (“FBT”) and luxury car tax compliance audits.
The latest move by the ATO in April 2021 was to send formal notices to Salary Packaging providers requesting novated lease data (from 2018 to 2021 and then annually) that they administer on behalf of all their clients. The timing of the request has been questioned by some industry leaders given their teams are already working relentlessly in reviewing and issuing end of FBT year reports to their employer clients.
The ATO’s request to Salary Packaging providers in April 2021 to disclose detailed data on all their clients Novated Leases indicates that cars are high on the agenda on upcoming ATO audits. This will supliment the car data the ATO recently obtained from State and Territory motor vehicle registry authorities to allow it to better target taxpayers for FBT audits.
The information the ATO have requested from salary packaging providers includes:
- Lessee details: Unique identifier of the lessee; name of the lessee; addresses of the lessee (residential and postal); date of birth of the lessee; Australian Business Number (ABN) of the lessee; all known contact telephone numbers (for example: fixed line, mobile) for the lessee; email address(es) of the lessee.
- Employer details: unique identifier of the employer; name (trading name and legal name) of the employer; ABN of the employer; addresses (business, postal and registered) of the employer; contact name of the employer; contact telephone numbers for the employer; email address(es) of the employer.
- Lease details: unique identifier for the lease transaction; lease start date; lease end date; lease expected end date; lease termination date; numberplate of the vehicle; type of vehicle (new or used); category of vehicle (sedan, wagon, utility, etc); lease price per month including GST; items packaged with the vehicle lease; expenses packaged with the vehicle lease (for example fuel, servicing); bank account name for the lessee; bank account number for the lessee; bank account BSB for the lessee.
We’ve summarised how the information requested by the ATO will assist with enforcing compliance across a range of taxes:
1. Fringe Benefits Tax (“FBT”)
The data the ATO have requested from State & Territory motor vehicle registeries as well as from Salary Packacing providers will allow it to identify compliance in the following areas:
- Salary packaging vehicles other than cars (i.e. utes, one of the questions was specifically focused on “category of vehicle”)
- Non-disclosure of car benefits and employee contributions in FBT returns (or failing to lodge FBT returns all together )
- Incorrect base value reductions where employees (and their novated leases) are re-deployed/re-employed in a related entity
- Private use of Tool of trade cars/exempt cars and non-compliance with Practical Compliance Guide PCG 2018/3
2. Income Tax
Employee after tax contributions form part of the employer’s assessable income and need to be disclosed on the Company/Trust tax return at income label 6(i) – Fringe benefit employee contributions.
The ATO will obtain after tax contributions from Novated Lease providers for every employer and through data matching, it will be able to identify taxpayers that do not include Employee after tax contributions in assessable income.
3. GST
The ATO will have information during audits to be able to identify employers that do not remit GST on after tax contributions.
4. Individual taxpayer compliance
Under a salary sacrifice arrangement, it is the employer that incurrs the car running costs and expenses (out of the employees pre-tax salary). As the employee has not “incurred” those costs they cannot deduct them.
Through data matching the ATO will identify taxpayers who have a Novated Lease and yet are deducting motor vehicle costs in their personal income tax returns (and therefore double dipping).
Key considerations
Being indirect tax and salary packaging specialists we’re acutely aware of industry developments and its important that you are.
Some of the key considerations both employers and salary packaging organisations need to take:
- The ATO is preparing to begin compliance measures in the car space;
- Ensure your compliance is in order, and if it isnt, get in touch with us;
- Prepare yourself for an ATO questionnaire and how you would handle it; and
- Salary packaging providers: inform your clients & re-iterate your privacy policies.