Taken goods for private use? Here’s the latest values for tax purposes
The ATO knows that many business owners naturally help themselves to their trading stock and use it for their own purposes. This common practice can occur in businesses such as butchers, bakers, corner stores, cafes, wine shops and more.
The ATO regularly issues guidance for business owners on the value it expects will be allocated to goods taken from trading stock for private use. The table below shows these values for the 2019-20 income year, taken from Taxation Determination TD 2020/1.
|Type of business||Amount (excluding GST) for adult/child under 16 years||Amount (excluding GST) for child 4 to 16 years old|
|Takeaway food shop||$3,440||$1,720|
|Mixed business (includes milk bar, general store and convenience store)||$4,260||$2,130|
The basis for determining values is the latest Household Expenditure Survey results issued by the Australian Bureau of Statistics, adjusted for CPI movements for each category.
The ABS collects at varying intervals detailed information about the expenditure, income, net worth and other characteristics of households resident in private dwellings throughout Australia. Information is collected during personal interviews and from diaries in which survey participants have recorded all personal expenditure over a two-week period. Interviews and diary keeping are spread over the financial year of collection.
At the “fine” level of expenditure, the survey details household expenditure in over 700 categories of items across a range of household composition groups. It is considered that these survey results provide reasonable and statistically valid estimates as to the community’s level of spending on a wide range of items.
Note that the ATO recognises that greater or lesser values may be appropriate in particular cases, and where you are able to provide evidence of a lower value, this should be used.
Car parking fringe benefits and arm’s length valuation
The ATO has announced that starting in February it is intending to contact a selection of business taxpayers that provide car parking benefits to their employees, and that use the market value method to arrive at a taxable value, to ensure these values have been calculated correctly.
There are five ways that an employer can calculate car parking benefits (the first three of which require you to keep records of the number of car parking fringe benefits provided):
- Commercial parking station method.
- Market value method.
- Average cost method.
- 12-week register method – once every five years, you must keep records of the use of car parking spaces for a 12-week period, and value the use as if you had used the commercial parking station method, the market value method or the average cost method.
- Statutory formula method – 228 car parking fringe benefits are deemed to arise from the use of each car parking space during the course of the FBT year and are valued in a way similar to the commercial parking station method, the market value method or the average cost method.
The commercial parking station method must be used unless you elect to use one of the alternative methods. Where the market value method is selected however, a suitably qualified value is required to substantiate that value.
The issue the ATO is seeking to address however, and which it hopes to resolve by contacting relevant employer taxpayers, is where the mere appointment of an arm’s length valuer is viewed as satisfying the requirements of the law. This, says the ATO, is not necessarily the case.
The ATO’s guidance on the matter dictates that a valuation report is also required, and that this must detail:
- the date of the valuation
- the precise description of the location of the car parking facilities valued (either the street address or block and section number)
- the number of car parking spaces valued and the value of the car parking spaces based on a daily rate
- the full name of the valuer and a description of their qualifications as a valuer
- the valuer’s signature
- a declaration stating that the valuer is at arm’s length from the valuation.
You must also be able to produce, when required, details of the basis on which the valuation was determined. This information may be set out in a separate valuer’s report.
Note that the market value method provides the taxable value of a single car parking fringe benefit. You can obtain the exact number of benefits provided only from records of actual use. For this method, the FBT law does not contain a specific rule for determining the actual number of car parking fringe benefits that may arise from each car parking space, nor for determining how many car parking spaces are in a given area.
Reconstructing tax records after a natural disaster
The ATO says it can help if you lost tax records due to a natural disaster such as a bushfire. It says it can achieve this by providing on-site visits to help you reconstruct lost or destroyed tax records and/or assistance to work out reasonable estimates if records cannot be reconstructed.
The ATO may be able to provide copies of information it already has, such as records of your tax returns, notices of assessment and payment summaries or income statements. It can also speak with third parties if appropriate.
Additionally, for business owners, the ATO says it can help by providing records of your:
- activity statements and tax returns, if lodged
- pay as you go (withholding) annual reports, if lodged by employers.
When to make a reasonable estimate
If your records cannot be reconstructed, the ATO says it will accept a reasonable estimate. It points out however that each taxpayer will be required to provide a signed letter declaring the estimate is true and correct. The ATO has already provided a “reasonable estimate pro-forma” that you can use.
Changes to the luxury car tax you may have forgotten
From 1 January 2020, primary producers can claim a refund of luxury car tax (LCT) they have paid on one eligible vehicle per financial year, up to a maximum of $10,000 (it used to be $3,000), for vehicles delivered to them on or after 1 July 2019.
If you lodged a claim for an eligible vehicle delivered on or after 1 July 2019, won’t need to make another claim to receive the increased refund amount.
From 1 January 2020 when the law came into effect, the ATO should adjust your refund based on the amount already received.
If an eligible vehicle was delivered to a primary producer on or before 30 June 2019, you can only claim a refund of 8/33 of the LCT they have paid, up to a maximum of $3,000. This factor (eight thirty-thirds) represents the difference between the current LCT rate of 33% and the previous 25% rate.
Credits and refunds
Credits for luxury car tax (LCT) can only be claimed if you are not registered for goods and services tax (GST). A refund may be available if you’re a primary producer or tourism operator who buys luxury vehicles.
If you are not registered for GST, and therefore can’t make an LCT adjustment on a business activity statement (BAS), you may however be entitled to a credit for LCT paid if:
- you overpaid LCT on a sale – that is, the supplier paid an amount of LCT that was not legally payable and you settled on that overpaid LCT
- you’ve paid LCT on a sale, or paid LCT on an importation, where you could have quoted but were unable to quote because you were unregistered at the time of supply or importation
- you’ve exported a luxury car (on which LCT has been paid) that is a GST-free export.
You are entitled to a credit only if no-one else has made a valid claim for a credit in relation to the credit entitlement. Note this claim for a credit must be made within four years of becoming entitled to the credit.
Claiming a credit for LCT
To claim a credit for overpayment of LCT:
- on a sale, you must use the approved Application for luxury car tax credit – entities not registered for GST form, and lodge it within four years of becoming entitled to the credit
- on a GST-free export, you must make a claim to the Australian supplier.
An eligible vehicle is a four wheel drive, or all-wheel drive, and is either:
- a “passenger car” with a ground clearance of at least 175mm
- an “off road passenger” vehicle.
As mentioned, from 1 January 2020 primary producers can claim a refund of LCT they have paid on one eligible vehicle per financial year, up to a maximum of $10,000, for vehicles delivered to them on or after 1 July 2019.
For LCT purposes, a primary producer is an individual, partnership, trust or company carrying on a primary production business, including:
- plant or animal cultivation
- fishing or pearling
- tree farming or felling.
If an eligible vehicle was delivered to a primary producer on or before 30 June 2019, they can only claim a refund of 8/33 of the LCT they have paid, up to a maximum of $3,000.
From 1 January 2020 tourism operators can claim a refund of LCT they have paid for each (our emphasis) eligible vehicle, up to a maximum of $10,000, delivered to them on or after
1 July 2019.
For LCT purposes, a taxpayer is a tourism operator if both the following apply:
- they use the car solely for the purpose of carrying on a business
- the principal purpose of their business is carrying tourists for tourism activities.
Tourism activities must be both leisure activities and of a touring nature.
A leisure activity includes activities involving a visit by a tourist to a site that has one of the following:
- scenic beauty
- cultural interest
- environmental interest
- historical interest
- recreational interest.
Carrying tourists for tourism activities does not include transporting passengers by either:
- taxi or limousine for fares
- a hire-car service.
If an eligible vehicle was delivered to a tourism operator on or before 30 June 2019, they can only claim a refund of 8/33 of the LCT they have paid, up to a maximum of $3,000.
Claiming the refund
You can claim a refund on the Application for luxury car tax refund – for primary producers and tourism operators form. This refund must be claimed within four years of becoming entitled to it.
If you have lodged a claim for an eligible vehicle delivered on or after 1 July 2019, you won’t need to make another claim to receive the increased refund amount.
From 1 January 2020 when the law came into effect, the ATO will adjust refunds based on the amount they have already received. Note that you can’t claim these refunds on a BAS or from the Department of Home Affairs.