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09 Oct 09 On the Jetto case and FBT

MEMBER 26 writes:

"The article in Volume 44/2 (August 2009, p 103) of the Taxation Institute's journal Taxation in Australia on the AAT Jetto Case should be of considerable interest to all practitioners who have clients who calculate their car FBT liability on the cost basis (log book) method.

It is another worrying example of the ATO espousing a view in their publications which has no basis under the legislation and which cannot be relied on if you wish to raise it in any argument before a Tribunal or Court. The ATO states there is no need to notify them of the method chosen as your business records are sufficient evidence of this when the plain words of the legislation clearly require a declaration to be lodged in order for the cost basis method to be chosen. This applies whether you pay FBT or use an employee reimbursement to eliminate the taxable value.

However, as with the current trusts debacle, I suspect that the ATO will not actively seek to enforce the terms of the legislation but if they come across this situation they may apply the legislation as it stands ie unless a declaration to use the cost basis method is actually lodged the client will be required to calculate its car FBT liability by reference to the statutory formula method.

My concern is what liability rests with the tax practitioner - the legislation is clear and unambiguous. I suggest we would have no grounds to avoid being liable for penalties & interest to our clients.

So we add on another cost of lodging annual declarations for those clients who wish to use costs basis method."

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