Proposed changes to the tax regime, particularly around the application of fringe benefit tax, will be of interest to a lot of close company owners, Polson Higgs tax partner Michael Turner says.
The Government recently announced changes to tax rules aimed at simplifying tax payments for small to medium-sized businesses.
Under the current rules, owning vehicles in a company would generally result in fringe benefit tax (FBT) being payable where there was also some private use and no exemptions applied.
The calculation of the FBT on those vehicles could be challenging and the rules difficult to understand, especially where only minor private use, such as travelling from home to work on a particular day, could result in FBT being payable for the whole day, he said.
‘‘This mind-set change can also be difficult for people to understand as they transition from operating as a sole trader, where there is no FBT but deductions are apportioned, to a company structure. As a result, many people pay FBT on the full value of the vehicle, incorrectly calculate FBT or avoid having vehicles in a company structure.''
Under the proposed changes to the tax regime, vehicles owned in a close company and provided to shareholder-employers would be treated in much the same way as a sole trader or partnership, with apportioned expenditure and depreciation, Mr Turner said.
Where that method was used, registering and paying FBT would not be required, saving time and compliance costs for the taxpayer, he said.
