ATO cautions businesses over FBT calculation methods

The Australian Taxation Office (ATO) has issued a notice to tax practitioners whose clients have provided car parking fringe benefits to their employees, cautioning that the taxable value of these benefits must be calculated correctly to ensure they are meeting their fringe benefits tax (FBT) obligations.

From February, the ATO announced it may contact business clients who have engaged an arm's length valuer as required under the market value method.

“In some instances valuers have prepared reports using a daily rate that doesn't reflect the market value. As such, the taxable value of the benefits is significantly discounted or even reduced to nil,” the ATO warned.

It urged tax practitioners and accountants to help their clients understand that engaging an arm's length valuer does not mean they've met all the requirements for working out the taxable value of their car parking fringe benefits.

“It is your clients' responsibility to confirm the basis on which valuations are prepared. They must examine any valuation they suspect is incorrect or which considerably reduces their liability,” said the ATO.

According to the Tax Office, at a minimum, a valuation report required under the market value method must detail the date of the valuation; the precise description of the location of the car parking facilities valued; the number of car parking spaces valued; the value of the car parking spaces based on a daily rate; the full name of the valuer, their qualification and signature; and a declaration stating the valuer is at arm's length from the valuation.

In addition to the valuation report, business clients need a declaration relating to the FBT year that includes the number of car parking spaces available to be used by employees; number of business days; and daily value of the car parking spaces.